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Topline: Why should we care about catastrophe models? California became the last state in the country to allow insurers to base rates on forward-looking models that take climate change into account instead of historical data following Insurance Commissioner Ricardo Lara’s regulatory reform last year. The catastrophe models, developed by private companies such as Verisk and Moody’s, will likely increase rates, especially in disaster-prone areas. What’s a private model? The Insurance Department set up a review process with non-disclosure agreements for participants to protect proprietary data — which consumer advocates complained would keep the models in a black box.
The first catastrophe model in the queue, by insurance consultant Verisk, is on track for approval this summer. What’s a public model? Lara is also sponsoring a bill, SB 429, by Sen. Dave Cortese to have universities create the nation’s first-ever public catastrophe model for wildfires, which could show people which actions can most lower their risk and compare against private models.
Reaction to the public model idea: The insurance industry is concerned a public model would tip the scales too much toward any one private model or underestimate possible losses, while consumer advocates are concerned the private models are overestimating possible losses. The lesson from Florida: As in most things property insurance, California is chasing its political foil Florida, which has had a public, university-developed hurricane catastrophe model for nearly two decades. But wildfires could be even harder to model, with lots factors in the equation, including fuel types, winds and firefighting capacity.
For more, read the full story in POLITICO’s California Climate newsletter. This story is published in partnership with POLITICO..
