Aon receives approval for updated Florida hurricane catastrophe model

Aon, a global insurance and reinsurance broking group, has received certification for its updated Florida hurricane model from the Florida Commission on Hurricane Loss Projection Methodology (FCHLPM) for ratemaking in the state.

The updated model is developed by Aon’s Impact Forecasting team and incorporates the latest research and technology, which aims to offer insurers a comprehensive view of risk for ratemaking in Florida.

This approval follows the one received last November from FCHLPM for Impact Forecasting’s US flood model.

The broker explains that these new models are part of a broader suite of solutions to support real-time loss forecasting, various accumulation scenarios, and climate risk assessment projects. The Florida hurricane model will be released within Impact Forecasting’s ELEMENTS 18.1 platform.

The updated model utilises the latest HURDAT2 historical hurricane records, sea-surface temperature data, and integrates insights into regional vulnerability, wind mitigation measures, and secondary building characteristics on individual risks. This, according to Aon, allows insurers to gain a more comprehensive view of risk and its associated uncertainties.

The update also features an event set that calculates wind hazard during the entire lifecycle of each simulated hurricane, allowing for variations in hurricane intensity associated with varying ocean temperatures. According to Aon, the model’s vulnerability component has been validated using extensive claims data from recent hurricane seasons and reflects variations in building code requirements and compliance practices.

Aon aims to allow insurers to navigate potential volatility and bolster their business resilience and understanding of loss drivers while managing portfolios, transferring risk effectively, and optimising capital.

David Colbus, Regulatory Compliance Lead, Aon’s Impact Forecasting, commented, “This certification highlights our continued innovation in the modelling space, and our drive to gain a better understanding of natural perils. The updated Florida hurricane model is an example of a collaborative effort within our firm that has resulted in a leading solution to quantify and manage risk, ultimately helping our clients to make better business decisions.”

Radovan Drinka, Model Development Lead for U.S. hurricanes at Aon’s Impact Forecasting, added, “As part of this update, we improved the underlying statistical framework in the area of claims and vulnerability, which has led to a more accurate sampling of storm losses. Meanwhile, through propriety and academic research, we bring clarity and confidence to hurricane analysis in order to help our clients reduce volatility across their portfolios and build business resilience.”

Aon highlighted that it now offers clients full transparency to the assumptions, data, and other inputs underlying the Impact Forecasting Florida hurricane model.

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