An Actuarial Approach to Property Catastrophe Cover Rating

Forty-one years of catastrophe loss data by state are used in this study to produce a model for rating catastrophe covers for insurers in any region of the continental United States. Smooth surfaces are fitted to the data by region, and experience rating is applied in an attempt to give appropriate weight to regional departures from the smoothed results. Severity distributions and frequencies are estimated for each region, and a method for applying them in pricing catastrophe covers is discussed. A method for using the experience for an insurer to produce an experience modification is also presented.