Demotech President Issues Public Comment to Treasury Dept. – InsuranceNewsNet


Thank you for the opportunity to respond to the US Department of the Treasury’s The proposed data calls for assessing climate-related financial risk. As a fifty plus year veteran of the insurance industry, an actuary, and an insurance company rating service that focuses on property insurance companies in catastrophe exposed areas of the country vulnerable to climate change impacts, I am pleased to express my support for this initiative.

For the past twenty-five plus years, Demotech has collected and reviewed insurer specific data associated with the physical risks insured by carriers (real properties) and the exposure of those risks to catastrophic loss including related loss adjustment expense to review and settle claims presented by insured. As the number and ferocity of catastrophic events, whether wildfire, flood, convective storm, hurricane, etc., has increased, the financial impact of this phenomenon on residents and insureds has been higher costs of reinsurance being passed on to the purchasers of insurance, whether consumers or businesses, through higher premiums.

I have a few thoughts on the data collection process outlined by the FIO. These thoughts reflect our position as the very first to review and rate independent, regional and specialty insurers. Regarding the threshold of $100 million in 2021 homeowners’ insurance premium in an effort to reach an 80% market share threshold in each of the ten states that are potentially most vulnerable to climate-related disasters, I note that every carrier in these ten states, and others, subjects its portfolio of real properties to catastrophe modeling so as to purchase levels of reinsurance deemed appropriate and realistic by management, regulators, and insurer rating agencies. The data requirements of the catastrophe modeling firms are quite consistent regardless of the size of the insurance carrier; accordingly, the FIO should be able to request similar information from smaller insurers without imposing an undue financial burden. Equally important, the smaller insurers competing against those that write the top 80% market share in each state often have a perspective on the conditions in the jurisdiction that the larger national carriers may not have developed.

I attach some of the company specific data gathering formats that we have utilized to evaluate catastrophe exposure and the impact of climate change on the insurance market. We believe we were the first to expand the horizontal component of annual catastrophe reinsurance programs so as to include more weather events in a single year. This response to the adverse impact of climate change was implemented more than a decade ago.

My executive summary is: I believe that it would not be a burden for smaller carriers to participate in the FIO’s study. Furthermore, the smaller carriers might add a perspective on each jurisdiction that the larger carriers might not have the ability to impart.

Further, we would be pleased to share the expertise of our key analysts in your efforts to develop a data collection format that provides the FIO with the broadest sample of data from a representative number of carriers.

Thank you for this opportunity to share my thoughts. If there are questions on my perspective or the attachments, or if the FIO wants to discuss our ability to add value to this landmark analysis, I can be reached at [email protected] or on my mobile phone at 1 614 595 3516.

Very truly yours

Joseph L. PetrelliACAS, ASA, MAAA (MBA)

President and Co-founder


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