Limitations to Any Model

Model Limitations
More Subtle Factors That the Models Can Currently Only Implicitely Reflect:

• Coverage D and Risk Excess layers


• Secondary uncertainty/ Correlation issues


• The degree of enforcement of local building codes


• Foliage


• Weather patterns before and after loss events


• Physical alignment of structures along events’ force vectors


• Local variations of concentrations or hazard (street address detail)


• Changes in claims handling and other industry practices

Also:

• Data for medium-sized events, 0-10 year return time losses, are not collected as consistently as for larger events. Modelers must look to larger events and back into these events.


• Data for mega-events, 250+ year return time losses, are also missing due to limited history. Modelers must extrapolate loss potentials from smaller events.

This is not a pipe. A pipe has weight, volume, texture, use, scent, taste and a history and a future independent of this view. A picture only has color, height and length, and does not have a past or future.

This is not a hurricane. A hurricane has varying rainfalls, pressure levels, shearing forces, embedded tornadoes, windblown debris, and follows an unforeseeable track to interact with land and values with their own independent history and future. A model only represents limited parameters, such as maximum sustained winds, forward speed, radius and central pressure and a simplified track of movement.

This is not a 500-year loss.

A return time loss is the actual result of the most severe loss in a period of time. It reflects the full physical, legal, economic and practical realities of the loss event, the insured values and the market.

An estimated loss only represents the result of a model applied to coded exposure data files under simplifying standard assumptions.