South Carolina § 38-75-1140 - Evaluation of natural hazard catastrophe models; requirements for modeling organizations.

§ 38-75-1140. Evaluation of natural hazard catastrophe models; requirements for modeling organizations.

(A) In recognition of the use of natural hazard catastrophe computer models and other recently developed or improved actuarial methodologies for projecting natural hazard losses, the director or his designee may make or cause to be made an evaluation of any natural hazard catastrophe model used in property rate filings in this State. Natural hazard catastrophe models are computer programs that estimate losses from potential natural hazard disasters, combining data on property exposures with information on natural hazards, such as storms or earthquakes, to generate estimates of potential losses.

(B) If required to do so by the director, a modeling organization that prepares catastrophe models used by insurers in rate filings in this State shall submit an initial report to the director or his designee consisting of but not limited to:

(1) a statement of its qualification as a modeling organization;

(2) an outline of the background and experience of the staff of the modeling organization engaged in the development and preparation of the catastrophe models used by insurers in rate filings; and

(3) one or more statements describing and attesting to the validity of the model for use in predicting losses associated with natural hazard catastrophes in this State. A separate statement must be made by an individual possessing expertise appropriate to the hazard being modeled in fields such as meteorology, engineering, building codes, geology, and actuarial science as they apply to natural hazard catastrophes faced by this State.

(C) The modeling organization shall submit a supplemental report to the director or his designee following any substantially material revision of the model if the revision is used by insurers in determining rates for this State. The supplemental report must specify the changes made to the catastrophe model, specify a list of variables that are subject to insurer input, and contain one or more statements by experts attesting to the continuing validity of the model for use in predicting losses associated with natural hazard catastrophes in this State.

(D) If the director or his designee determines the expert statements provided to be insufficient, he may reject the report.

(E) In conducting his evaluation of a model, the director or his designee may rely on the report of an official of another state who has made such an evaluation pursuant to the laws of that state.

(F) Proprietary or trade secret information that is submitted in a report, or is obtained, developed, or compiled in the course of any evaluation must be kept confidential by the director.

(G)(1) To recover the costs associated with the review and evaluation of catastrophe models, the director or his designee may impose a filing fee on:

(a) all insurers who use catastrophe or other computer simulated models; and

(b) modelers or modeling organizations that submit a model to the department for its review, evaluation, or approval. This fee must be retained by the department to defray the costs of retaining actuaries and other experts to evaluate such models.

(2) The fees collected pursuant to this section must be used only to offset expenses associated with the review of catastrophe models.

HISTORY: 2004 Act No. 290, SECTION 2.A, eff six months after approval by the Governor (approved July 29, 2004); 2007 Act No. 78, SECTIONS 12, 13, eff June 11, 2007, applicable to taxable years beginning after December 31, 2006.