Analysts Say Cat Models Would Encourage Wildfire Mitigation Measures
Predictive modelers told California regulators on Thursday that the state’s antiquated rules for calculating wildfire risk when setting property insurance rates discourage innovative mitigation measures that could ultimately reduce losses.
Nancy P. Watkins, a principal and consulting actuary for Milliman, said during a webcast on “home hardening” hosted by the state Department of Insurance that California is one of only three states that doesn’t allow insurers to use catastrophe modeling to determine wildfire risk. Rates must be based on historical losses.
Nancy Watkins
Watkins said that is a “very simple” method of ratemaking. “It’s kind of like expecting the Rocky Mountains to be flat because we just drove through Kansas and Missouri,” she said.