Florida's New Deductible Law Included In CAT Model
NU Online News Service, Jan. 11, 4:09 p.m. EST?Florida's new law setting a limit of one annual hurricane deductible expense for homeowners insurance has now been incorporated into a catastrophe modeling system, a catastrophe model firm announced.[@@]
The system allows carriers to analyze the impact of the rules change on their portfolios, explained Boston-based AIR Worldwide Corp.
AIR said it has adapted its hurricane model to account for Florida's new annual deductible. The firm said its updated model can help insurers assess the impact of the new law on their portfolios to apply with the state for the necessary price adjustments in time for the May 1 implementation.
Florida changed the law by which insurers can charge deductibles for losses caused by hurricanes, in light of the 2004 hurricane season, AIR Worldwide noted.
Moving away from a per-hurricane deductible, insurers are now required to charge a single annual deductible. Once the deductible has been reached, homeowners will be charged their standard homeowners deductible. The new law will take effect on new or renewing policies starting on May 1, 2005.
According to AIR Worldwide, this change is a critical issue for all residential insurers writing in Florida because it affects their pricing algorithms, which are currently based on an occurrence deductible.
"The action recently taken by Florida lawmakers will impact insurer portfolios in the coming year and may prompt some to file applications for rate changes," said Uday Virkud, senior vice president at AIR Worldwide.
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