For severe weather risks, traditional actuarial models are often insufficient to fully capture the risk. Most (if not all) insurance companies use catastrophe m

For severe weather risks, traditional actuarial models are often insufficient to fully capture the risk. Most (if not all) insurance companies use catastrophe models to accurately price severe weather risk. As someone that works closely with these things, I can confirm that the approved models in question haven't changed significantly in the past few years. I know for a fact that one of the major hurricane models in use in Florida hasn't seen major changes over the past few years (just updates to incorporate the next year's worth of hurricane data). However, two major factors impact losses to insurance companies in these states. In Florida, litigation cnan inflate losses to an absurd degree. The state accounts for 9% of all claims in the US, but 79% of the legal cases. Laws are trying to improve this, but it's a significant deterrent to writing business in the state. California, on the other hand, doesn't allow the use of catastrophe models outside of earthquake risk. Instead, they rely on claims from the past 20 years to set rates. For a peril like wildfire (which is infrequent enough that claims data won't give a full picture of the risk), this significantly impacts a company's ability to account for wildfire risk.