Predictive modelers told California regulators on Thursday that the state’s antiquated rules for calculating wildfire risk when setting property insurance rates discourage innovative mitigation measures that could ultimately reduce losses.

Nancy P. Watkins, a principal and consulting actuary for Milliman, said during a webcast on “home hardening” hosted by the state Department of Insurance that California is one of only three states that doesn’t allow insurers to use catastrophe modeling to determine wildfire risk. Rates must be based on historical losses.

Watkins said that is a “very simple” method of ratemaking. “It’s kind of like expecting the Rocky Mountains to be flat because we just drove through Kansas and Missouri,” she said.

California Insurance Commissioner Ricardo Lara held the Thursday morning webcast to hear opinions on whether using catastrophic modeling in ratemaking will make homeowners’ insurance more affordable, and how wildfire mitigation measures may reduce the spread and risk of future wildfires.

Watkins gave testimony along with representatives for Risk Management Solutions, AIR Worldwide, Karen Clark & Co., AIR Worldwide, CoreLogic and AIS Risk Solutions. Their combined message: Catastrophic modeling can encourage mitigation measures, such as installing fire-resistant vents on roof openings and fireproof materials for fences and decks by more accurately predicting risk.

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