Hurricanes can be unpredictable, but planning for all possible contingencies can help blunt some of the financial damage they cause.
At the spring 2025 meeting of the Casualty Actuaries of the Southeast (CASE), Nick Weltmann, a lecturer in the Master of Professional Studies in Insurance Management (INSM) program at Columbia University School of Professional Studies (SPS), presented his Dynamic Homeowners Simulation model, which tests the profitability of insurance companies’ decisions in the face of potential hurricane events.
The CASE conference is a day-long meeting with six hour-long presentations, held twice a year to offer actuaries in the region an opportunity to come together for educational purposes. These presentations highlight the most pressing and timely issues facing the actuarial profession. Weltmann’s session aligned squarely with the conference’s objectives, particularly given the growing concern over hurricane activity in Florida, one of the Southeast states represented at CASE. His model offered attendees a powerful tool for both planning and education around these high-impact weather events.
The simulation itself models market results based on the planning choices of teams representing different insurance companies, each with a 2% market share in a Florida-like state. Each “round,” parameters of the event are randomly generated, such as whether or not a hurricane makes landfall, as well as the strength of the hurricane if it does. Within the model, teams select annual rate changes, deductible changes, and reinsurance attachment levels for beach, inland, and central territories within the state. The goal is for teams to be profitable after three rounds.
The model was first tested in the classroom during fall 2024, coinciding with two strong hurricanes—Helene and Milton—that struck Florida. The simulation ran with data from five teams of students: four representing private insurers, and a fifth tasked with managing the windstorm pool, a state-level insurance program for high-risk property owners who may not have access to the standard market.
In his CASE presentation, Weltmann walked the audience through the model in detail, demonstrating how the changes selected by the teams dynamically influenced new and renewal business loss results. He also illustrated the impact of hurricane-related losses and the resulting direct and net combined ratios for each company. The internal catastrophe model was highlighted as well, showing how it determines the initial rate charged by the windstorm pool to each insurer.
“This simulation exercise is an important part of the Product, Pricing, and Distribution curriculum in the Insurance Management program,” Weltmann says. “It has both theoretical and practical applications that can be applied in the classroom and in the real world.”
Following the simulation exercise at CASE, Weltmann presented the article “Preparing for the Storm,” written by the student windstorm team and featured in the inaugural edition of the M.P.S. in Insurance Management journal, The Change Catalysts. The article compares and contrasts the actions taken by the student windstorm pool team during the simulation exercise to the actual actions taken by Citizens Property Insurance as a result of the multiple Florida hurricanes. Citizens Property Insurance is tasked by the state to insure properties which cannot find insurance in the voluntary market. The simulation provided a meaningful model for students and professionals alike to understand the recent challenges of providing insurance for uninsured risks.
About the Program
The Master of Professional Studies in Insurance Management is for career professionals who want to accelerate their advancement to leadership positions or broaden their expertise in the industry. It accommodates both professionals already working in insurance and those looking to make a career change. The program is part-time, online, and instruction is asynchronous to accommodate working professionals.
Applications are reviewed and candidates are accepted on a rolling basis for the M.P.S. in Insurance Management program. Learn more about the program here.
