Granularity of Loss Costs Could Allocate Climate Change Losses to Street Address
COLUMBUS, Ohio, Nov. 03, 2026 (GLOBE NEWSWIRE) -- On November 14, 2026, at the National Association of Insurance Commissioners fall meeting in Dallas, Texas, Demotech, Inc.’s President and co-founder Joseph L. Petrelli, ACAS, ASA, MAAA, MBA will share what he has identified proving that statistical reporting can introduce additional granularity in the presentation of loss costs to identify the impact of individual phenomena impacting the availability and affordability of insurance because they increase the cost of insurance or the predictability of losses.
According to Petrelli, “The loss cost presentation format in 2026 is the same as the format introduced in the mid-1980s, when advisory organizations first moved from promulgating premiums to promulgating loss costs. Introducing additional granularity in loss and loss adjustment expense information would allocate the incremental loss and LAE costs from existing or emerging phenomena such as climate change, tech-enabled litigation instigation, natural disasters, and other phenomena that have emerged since the 1980s, to the premium charged at the street address level of the insured. These additional insights would provide stakeholders with an understanding of the incremental premiums associated with each phenomena. The 1980s format that we currently utilize and rely upon needs to be enhanced to capture data on the phenomena that have emerged over the past forty years. This level of additional granularity is available through enhanced technological capabilities in place today. Think about the capabilities of cell phones in the mid-1980s versus the capabilities of cell phones today. There is no reason for statistical reporting and loss cost presentations to be stuck in the 1980s, as emerging causes of loss or exacerbation of existing causes of loss have increased the cost of insurance, accelerated litigation frequency, and adversely impacted consumers. Granular information is the key to analysis, and communication.”
The level of granularity shown above is illustrative only. The enhanced degree of granularity selected by stakeholders is a practical consideration.
Additional granularity and a revised presentation format would not revise an advisory loss cost. However, the granularity would provide details and insights that the 1980s loss cost format does not provide.
About Demotech, Inc.
Established in 1985, Demotech, Inc. is a financial analysis firm located in Columbus, Ohio. Demotech has served the insurance industry by providing objective and independent Financial Stability Ratings® (FSRs) for Property & Casualty insurance companies, Life & Health insurance companies, and Title underwriters, among others. As the first company to have its rating process formally reviewed and accepted by Fannie Mae, Freddie Mac, and HUD, Demotech has been leveling the playing field by offering FSRs to insurers of all sizes. As of July 11, 2022, Demotech is registered with the U.S. Securities and Exchange Commission as a nationally recognized statistical rating organization (NRSRO) in the class of ratings for insurance companies.
The latest FSRs of all entities reviewed and rated by Demotech, Inc. can be found at www.demotech.com. Information on the procedures and methodologies we utilized to determine and assign credit ratings can be found at https://www.demotech.com/wp-content/uploads/Ex2.pdf. For more information, call Demotech at 1-800-354-7207, or go to inquiry@demotech.com.
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