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# It's Models All the Way Down: How Risk Really Gets Priced
- URL: https://www.riskmarketnews.com/its-models-all-the-way-down-how-risk-really-gets-priced/
- Published: 2026-03-04T15:00:28.000Z
- Updated: 2026-03-11T13:32:16.000Z
- Description: Georgia jumps into the model transparency debate, AI platforms aren't playing nice when it comes to catastrophe risk.
- Author: Risk Market News
- Tags: RMN Member Newsletter

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##### THIS WEEK'S RMN

**`MODELS`** · **Georgia Joins Chorus of State Proposals Targeting Catastrophe Model Transparency**  
*If passed, the bill could have significant implications for how risk is priced in one of the Southeast's most exposed markets. —* [Read →](https://www.riskmarketnews.com/georgia-joins-chorus-of-state-proposals-targeting-catastrophe-model-transparency/)

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**`MARKETS`** · **Berkshire's Abel Says Energy Holdings Can't Be a "Deep Pocket" For Growing Wildfire Risk**  
*In his first shareholder letter, Berkshire CEO Greg Abel draws a firm line on wildfire liability for energy holdings, even as Berkshire's own insurance operations absorbed nearly $1.8 billion in underwriting losses tied in part to the 2025 Los Angeles fires. —* [Read →](https://www.riskmarketnews.com/berkshires-abel-says-energy-holdings-cant-be-a-deep-pocket-for-growing-wildfire-risk/)

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**`MODELS`** · **TWIA Makes a $4.3 Billion Hurricane Bet As Models Diverge and Tail Risk Mounts**  
*When Texas rewrote the rules on how much hurricane risk its coastal insurer of last resort must fund against, it also quietly transferred the portion it stopped covering. —* [Read →](https://www.riskmarketnews.com/twia-makes-a-43-billion-hurricane-bet-as-models-diverge-and-tail-risk-mounts/)

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**`MARKETS`** · **Hawaiian Electric Says Court Ruling “Derails” Insurers’ Effort to Block Maui Wildfire Settlement**  
*Two years after the Maui wildfire, Hawaiian Electric is restructuring its post-event capital stack, combining convertible debt financing with emerging state liability limits to contain wildfire exposure. —* [Read →](https://www.riskmarketnews.com/hawaiian-electric-says-court-ruling-derails-insurers-effort-to-block-maui-wildfire-settlement/)

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**`MODELS`** · **Anthropic Says AI Has a Catastrophic "Collective Action" Problem**  
*Anthropic has rewritten its flagship safety framework to acknowledge that no single AI developer can unilaterally prevent catastrophe — and to explain what it will and won't commit to doing alone. —* [Read →](https://www.riskmarketnews.com/anthropic-says-ai-has-a-catastrophic-collective-action-problem/)

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## How Cat Models Became A De Facto Rate Trigger

![](https://storage.ghost.io/c/5f/d8/5fd861a0-e273-43de-ac77-c473390d89d5/content/images/2026/02/collier.jpeg)

When a catastrophe model updates its estimates of hurricane risk, most Florida homeowners never hear about it. But they feel it — in the form of higher premiums that arrive months later with no explanation.

That's the central finding of new research from **Dr. Ben Collier**, a professor at the **University of Wisconsin-Madison** and a guest on the latest episode of the Risky Science Podcast. 

Using twenty years of Florida data linking cat model outputs to insurer rate filings, Collier and his co-authors [document something the industry has long suspected](https://papers.ssrn.com/sol3/papers.cfm?abstract%5Fid=6170366&ref=riskmarketnews.com) but rarely quantified: a one-dollar increase in modeled expected loss translates to roughly five dollars in higher premiums for homeowners.

The multiplier matters because it reveals how much of the cost passed on to policyholders goes beyond pure expected loss. Florida regulations require insurers to justify hurricane rate changes with a catastrophe model, effectively making model revisions the trigger for premium adjustments. When models update — as they did dramatically following the 2017 hurricane season — the pricing shock moves through the entire market.

Collier explains that the gap between the $1 model input and the $5 premium output reflects two main cost drivers: claims handling expenses and, more significantly, the cost of capital. 

Florida domestic specialists, which spend roughly 58 cents of every premium dollar on reinsurance, are especially exposed. Unlike national carriers that diversify across geographies, these firms are heavily concentrated in hurricane risk and disproportionately reliant on global reinsurance markets — meaning when reinsurance capital gets scarce, Florida homeowners feel it first.

The episode also addresses the **AIR**\-**Moody/RMS** duopoly, the systemic risks of a market anchored to two models, and why catastrophe models are structurally designed to price current-year risk rather than forward-looking climate trajectories.

👉 **Listen to the**[ **full episode**](https://pod.link/1825669405/episode/ZjVlNDg0OWYtMTI4My00NTdlLWI0ZWYtMDdhODM3NGJiNjAz?ref=riskmarketnews.com)

Follow the ‘Risky Science Podcast’  
[Apple Podcasts](https://podcasts.apple.com/us/podcast/risky-science-podcast/id1825669405?ref=riskmarketnews.com) | [Spotify](https://open.spotify.com/show/5K2dS2k9JghYgDzThPMvp0?si=95OFw3K3Qii51RScyttsdg&ref=riskmarketnews.com) | [Overcast](https://overcast.fm/itunes1825669405/risky-science-podcast?ref=riskmarketnews.com)

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