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Flood risk continues to be one of the most difficult perils to price for the homeowners insurance industry, and until recently many have considered it to be uninsurable. As a result, flood insurance in the U.S. has traditionally been offered primarily through the National Flood Insurance Program (NFIP), operated under the auspices of the Federal Emergency Management Agency (FEMA), and a few private insurers. However, recent legislation -coupled with improved flood risk modeling, reinsurance and insurance market capacity, and consumer demand -is making the possibility of a private flood insurance market more viable.
Flood creates more losses than any other natural catastrophe peril, but is one of the least insured perils. Uninsured flood losses have exceeded those covered by insurance in many recent flood events.
Flood risk varies over short distances, and a successful risk classification plan needs to accurately price this risk. Milliman is one of the first companies to develop sophisticated flood insurance solutions and has extensive experience addressing the challenges inherent in this work.
Milliman is at the forefront of innovation in flood insurance.
Milliman Bungalow is a complete, modern rating solution for insurers to quickly and cost-effectively build a profitable flood business.
Milliman’s PinPoint delivers relevant geographic rating insights to your system at the point of decision through a simple API.
Pixel™ is a web-based, interactive premium comparison platform that helps companies quickly understand their rating positions and make informed decisions. The software incorporates:
Test sensitivity of key metrics to assumptions
Example: Win Rate by Permissible Loss Ratio
Flood pricing structures
To reduce time and data required to enter the flood arena, Milliman has developed market baskets. These are portfolios of hypothetical risks with realistic distributions of characteristics used for property and flood insurance pricing. They include:
Relative elevation measures whether a point is higher or lower than the surrounding area
Milliman develops and maintains rating engines to calculate premiums of many existing flood programs, including the NFIP. Further, we have extensive competitive data on homeowners premiums, which can be used to assess the premium increase to policyholders of adding a flood endorsement.
Premium Rank can be used to estimate the competitiveness of a new program against likely competitors, as shown below.
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Climate resilience refers to the recognition and planning by individuals, businesses, and governments of the influence of climate on specific hazards.
Milliman provides the full range of property analytics a carrier needs to match price to risk, get better ratings, and improve profitability in the most difficult markets.
Utilizing available data, Milliman has developed a take-up rate model that can help private insurers better understand how to test their products, acquire new business, and grow their written premium.
This articles explores some questions and challenges for aspiring U.S. private…
New insurtech product, Milliman PinPoint, selected by North Carolina Rate Bureau to deliver granular flood rating plan
Flood: It’s not just a coastal problem;(Leader’s Edge, October 1, 2019)
Almost 2 Million Homes Are at Risk From Dorian. Most Lack Flood Insurance. (New York Times, September 6, 2019)
The Ridgecrest Earthquake: Will Recent Quakes Shake Up California's Insurance market? (Insurance Journal, August 5, 2019)
Waiting to Erupt (Best’s Review, June 2019)
Milliman's Rollins: Localized Flood Data Opens Coverage to Tens of Millions (AM Best TV, May 15, 2019)
Major flooding in the South is a cautionary tale for all homeowners (MarketWatch, May 13, 2019)
Wall Street Is Masking the True Cost of Climate Change for Coastal Homes (Bloomberg, March 26,2019)
U.S. Flood Models Are Still in Their Infancy, So Underwriters Must Be ‘Cautious Consumers’ (Carrier Management, July 1, 2018)
Milliman to design NFIP rating plan (Business Insurance, November 15, 2017)
Work on national flood insurance bill continues (WRKF.org, August 2, 2017)
Editorial: Storm clouds over flood insurance fixes (Tampa Bay Times, July 21, 2017)
Private insurers ready to plunge into flood market (Insurance Journal, July 2017)
Private market flood insurance is cheaper in many cases (Terms + Conditions, July 13, 2017)
Study: Private flood coverage could slash costs for many in Louisiana, but some could see prices double (The Advocate, July 13, 2017)
The private flood insurance market is stirring after more than 50 years of dormancy (Forbes, August 2016)
Remember the flood insurance scare of 2013? It's creeping back into Tampa Bay and Florida (Tampa Bay Times, August 5, 2016)
Nancy Watkins is a principal and consulting actuary with the Property and Casualty Practice in Milliman’s San Francisco office. She manages an actuarial consulting practice that specializes in climate resilience, insurtech, and c...
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