6Industry News Continued dfrom Page 5The National Business Forum on CMSP will address thisand will:Ocean industries are encouraged to participate in the NationalForum. Information and registration for the event can befound by clicking WOC National Business Forum on MSP.• Create a clear understanding <strong>of</strong> CMSP in the oceanbusiness community• Define and examine the potential business impacts andbenefits <strong>of</strong> CMSP• Ensure the business community is fully informed <strong>of</strong> thespecific U.S. CMSP process and plans• Develop a WOC Action Plan for engaging CMSPand facilitating/coordinating business involvement inCMSP as it develops in the U.S.CMSP is defined by the Task Force as “a comprehensive,adaptive, integrated, and transparent spatial planning process,based on sound science, for analyzing current and anticipateduses <strong>of</strong> ocean, coastal, and Great Lakes areas. CMSP identifiesareas most suitable for various types or classes <strong>of</strong> activities inorder to reduce conflicts among uses, reduce environmentalimpacts, facilitate compatible uses, and preserve critical ecosystemservices to meet economic, environmental, security,and social objectives”. CMSP seeks to move sea use planning“away from the current sector-by-sector, statute by statute approach”according to the Task Force information.The National Forum is being organized by the WOC inpartnership with Battelle Memorial Institute, which becamea WOC Founding Member in 2010.Plans Announced for Great OutdoorsWeekPlanning is well under way for another eventful Great OutdoorsWeek, the American Recreation Coalition’s (ARC)annual celebration <strong>of</strong> outdoor recreation and its importantcontributions to the well-being <strong>of</strong> the American people andtheir communities. The Week, which begins with the observance<strong>of</strong> National Get Outdoors (GO) Day on Saturday,June 11, <strong>2011</strong>, will include special events showcasing keyrecreation programs and recognizing the outstanding effortsbeing undertaken across the country to improve outdoorrecreation experiences. Great Outdoors Week is one<strong>of</strong> the focal points <strong>of</strong> Great Outdoors Month, proclaimednationwide by the President and by state governors in everystate throughout the United States.Industry News Continued on Page 7
Industry News Continued df from Page 6“Carriers are still analyzing the impact <strong>of</strong> the model onby Ken AmrheinThe <strong>2011</strong> ModelIf “there’s squalls out on the Gulf Strea, a big storm’s comingsoon.” In his 1974 opus “Trying to Reason with HurricaneSeason,” Jimmy Buffet told the insurance buying public allthey need to know about a damaging storm’s impendinglandfall. If only it were this simple.In 2003, Risk Management Solutions (RMS) took a stab atpredicting catastrophic windstorm damage with a majorrevision to its North Atlantic hurricane model. In subsequentyears, revisions to that model followed. But a majorupdate released in late February has brokers asking if this,coupled with recent event sin Japan, will prove a catalyst inhardening the seemingly perpetual s<strong>of</strong>t market.The marketplace knew it was coming. RMS put out the word<strong>of</strong> its impending release <strong>of</strong> version 11.0 almost a year ago.“RMS sends out advanced versions <strong>of</strong> its revisions for carriers toreview and test as well as to help manage outcome and help setstrategy for implementation,” says Jim Sipich, a property brokerout <strong>of</strong> Crump’s San Francisco <strong>of</strong>fice. “This helps relieve some <strong>of</strong>the shock to the market when it is actually released.”Brokers are concerned with how the model update may affectpricing given increased annual average loss estimates based ondata in already high-risk areas like Florida and Texas. While somecoastal regions may actually show decreased in projected lossesbecause <strong>of</strong> more stringent building codes, this is not the case inall coastal regions. Another major concern is that any gains insuch high-risk areas will be negated by increased loss projectionsacross inland counties. For example, projection increases by asmuch as 50% in Florida and more than 90% in Texas.In its latest revision, the RMS model indicates that a greaterexpanse <strong>of</strong> inland areas suffer much more damage fromhurricanes then previously believed, in part because <strong>of</strong> laxbuilding standards and evidence <strong>of</strong> ro<strong>of</strong> damage at relativelylow wind speeds.Brokers agreed that it will take some time to see the extentto which the model will affect the marketplace.“I expect most [carriers] will implement the new model tosome degree over the next year,” Sipich says. “The truth isthat no carrier wants to be the first to hit the marketplacewith new underwriting or pricing data in response to a majormodel revision like this.”7their portfolio and pricing models,” says Adam Kagan,chief <strong>of</strong> marketing relations for Crump. “as a carrier, yougo to bed thinking the exposure is ‘x.’ You wake up the nextday to see a model revision that indicates it’s actually ‘y.’ If‘y’ yields greater exposure and increased premium requirements,what is the carrier supposed to do?”Model revisions have other effects. “While it’s true that underwritingguidelines may be affected by model changes, themajor effect models can have on the marketplace has to dowith capacity carriers have and how they choose to use it,”says Rich McElreath, a Crump property broker. “Not just netcapacity, but also capacity from their treaty reinsurers.”“Instead <strong>of</strong> <strong>of</strong>fering $10 million, maybe now [the <strong>of</strong>fer frominsurers or reinsurers] will be %5 million,” Kagan says. “Italso affects attachment points, i.e. primary vs. excess.”Kagan is also concerned about how rating agencies willrespond to the RMS revision. “Rating agencies use modelresults to assist in analyzing a market’s financial positionand support rating analysis,” he says.A model’s effect on the insurance industry is “more aboutcapital requirements than underwriting,” says Dr. ClaireSlouch, RMS vice president. In terms <strong>of</strong> losses, the model’smain focus is severity, not frequency, she says. “Severityis a powerful measure <strong>of</strong> solvency,” she says. “Historically,model revisions are introduced in the wake <strong>of</strong> a disaster.With this model we tried to stay ahead.”While she acknowledges that the industry does not typicallyjust “take the model and incorporate it overnight,” shebelieves that data will affect the marketplace this year.It’s early, and brokers are still reviewing the impact. “Treatyreinsurance costs, specific impact <strong>of</strong> the changes on carriers’portfolios as well as the basic economic principle <strong>of</strong>supply and demand will all contribute to potential changesin the marketplace,” says Kagan.“Some insureds may fee more <strong>of</strong> an immediate impact thanothers, and it really is a case <strong>of</strong> ‘stay tuned.’”Kagan and other brokers stopped short <strong>of</strong> saying yes when askedif carriers historically use revised model data as a crutch to raisepremiums. “Ultimately, the model is a tool,” he says. “Would Ibe shocked if some carriers used it to justify hardening the marketand raise prices? No,” he says. “Will the entire marketplaceaccept it and follow the changes? We’ll have to wait and see.”
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