The California Department of Insurance announces it will conduct a virtual public workshop regarding potential changes to the California Code of Regulations to allow property and casualty insurers to
use catastrophe models for purposes of ratemaking.
The public is invited to participate in the workshop discussions. To increase public participation and improve the quality of any regulations that Insurance Commissioner Ricardo Lara ultimately adopts, interested parties are invited to attend the virtual meeting and offer comment, if they so choose. The workshop is set for April 23, starting at 2 p.m. and continuing until all in attendance wishing to provide comments have commented, or 5 p.m., whichever is earlier. Registration is available at https://us06web.zoom.us/webinar/register/WN_5qoIrbAmRdqzrunzpjpblw.
Under the California Public Records Act, written and oral comments, and associated contact information — e.g., address, phone number, email, etc. — become part of the public record and may be released to the public upon request.
The telephonic call-in line to be used for the public hearing is accessible to those with hearing impairment. Those with sight or hearing impairments are requested to provide advance notification in order to review available accommodations, if necessary, by contacting Abigail Gomez, California Department of Insurance analyst, 300 Capitol Mall, 16th Floor, Sacramento, CA 95814; 916-492-3507; CDIRegulations@insurance.ca.gov.
For purposes of promoting discussion, participants should be prepared to present specific comments on the draft regulation texts during the public discussions. The draft text can be viewed at https://www.insurance.ca.gov/0250-insurers/0500-legal-info/0300-workshop-insurers/upload/Catastrophe-Modeling-and-Ratemaking-Workshop-Draft-Text-of-Regulation.pdf. Participants are also invited to submit written statements and are encouraged to provide supporting documents and materials as well.
The text under consideration concerns the portion of Lara’s sustainable insurance strategy pertaining to catastrophe modeling. This text addresses, among other things, the use of catastrophe modeling in the rate approval process, transparency requirements, and the incorporation of wildfire safety measures.
Public input regarding alternatives
In connection with this workshop discussion, the department seeks public input regarding alternatives to the contemplated regulations. The public may provide written or oral comments outlining any alternatives that would secure the same benefits as the contemplated regulations allowing property and casualty insurers to use catastrophe models in support of rate applications. The anticipated benefits of the contemplated regulations include the following:
- Improving pricing accuracy and rate stability by allowing insurers to use additional tools to assess prospective exposure to catastrophe losses in their rate calculations.
- Promoting availability of insurance in areas that have been underserved by improving pricing accuracy and encouraging a more competitive market.
- Promoting fairness as models can account for risk mitigation trends in a more timely manner as a result of risk mitigation actions taken at community and property levels.
- Encouraging uniformity and consistency in insurance ratemaking by allowing the use of scientifically, computationally and actuarially sound models to project catastrophe losses in property and casualty lines, a practice allowed in other states.
- Increasing openness and transparency in business and government by establishing a procedure to allow for thorough investigation of a model to determine what information and data are pertinent to using that model in ratemaking.
- Clarifying and expediting the review of modeled catastrophe loss projections and the overall rate review process by establishing the role of a model advisor to direct a new procedure specified by these regulations and make determinations as to what constitutes required model information in a rate application. Without this procedure, model disputes would likely occur during the rate application, potentially leading to lengthy delays in the rate review and approval process.
- Standardizing the usage of nonmodeled losses to streamline the rate review approval process, minimize disputes and allow for the more focused review and faster approval of rate applications.
For each suggested alternative, comments should provide analysis and supporting information detailing the economic impact on entities that would be subject to or affected by the contemplated regulations. Input regarding alternatives should be submitted by April 23 to Jon Phenix, California Department of Insurance attorney, 300 Capitol Mall, 17th Floor, Sacramento, CA 95814; 916-492-3705; Jon.Phenix@insurance.ca.gov.
This is not a formal public hearing on proposed regulations. Participation in this workshop is not a substitute for participation in any formal rulemaking process that may follow. The department is not required to respond to comments received in connection with the workshop discussion, and the comments might not be included in any record. However, the commissioner will consider public comments received in this workshop discussion when contemplating regulatory changes that may be proposed in a notice of proposed action.
Information provided by California Department of Insurance
