The Florida Senate Committee on Banking and Insurance met today, January 12, 2010. The following is a brief review of the insurance-related matters that were discussed as part of the agenda.

Dr. Shahid Hamid, who directs the Laboratory for Insurance, Economic and Financial Research at Florida International University’s International Hurricane Research Center, provided an overview and update on the Florida Public Hurricane Loss Model (“Public Model”).

The cost of developing the Public Model was $2.7 million. Used by the Florida Office of Insurance Regulation (“OIR”) up to 125 times per year, it continues to be funded with $600,000 annually.

Unlike the Public Model, explained Dr. Hamid, private models are not transparent. Therefore, the Public Model is necessary to provide an independent validation or corroboration to evaluate insurer rate requests. Thus, Dr. Hamid explained, the data collected by the Public Model should be exempt from Florida’s Sunshine Laws and remain confidential.

Further, the Public Model uses two types of insurance data that most private insurers generally categorize as trade secret because of its fundamental value to their competitiveness:

Company policy exposure data, which is needed each time the OIR or an insurer requests data processing through the Public Model Insurer claims and exposure data pertaining to specific hurricanes
Without the Sunshine Law exemption for both types of data, explained Dr. Hamid, insurers would be unwilling to provide it to the Public Model, which, in turn, could not produce loss estimates for use by either the OIR or insurers.

Senator Mike Bennett (R – Bradenton) asked several questions relating to the costs and use of the Public Model. Dr. Hamid reiterated that the Public Model’s annual budget is $600,000, and that it has undergone rigorous review prior to approval by the Florida Commission on Hurricane Loss Projection Methodology (“Commission”). Dr. Hamid insisted that the Public Model is as good, if not better than any other model.

Dr. Hamid affirmed that the Public Model could be self-sustaining if it could charge fees based on its actual costs, but that some funding could be needed because the OIR is a client. Currently, 20 private companies use the Public Model.

Dr. Hamid also noted that a commercial residential version of the Public Model is being developed, pending the receipt of data for implementation. However, no Commission standards for commercial residential policies currently exist.

The Committee agenda also included a presentation on a recently-completed Open Government Sunset Review of Section 627.06292, F.S., Hurricane Loss and Associated Exposure Data Utilized for the Development of the Public Hurricane Loss Projection Model.

The resultant recommendation from the Sunset Review was to reenact the current exemption for the Public Model data, but with a requirement that Florida International University analyze and annually publish all insurer hurricane loss and exposure data by county without identifying company information.