Drought and Heat Waves


Drought continues to make the headlines, with the latest U.S. Drought Monitor showing moderate to exceptional drought covers 30.6 percent of the contiguous United States.

Its weekly update also shows that 82 percent of the state of California is in a state of extreme or exceptional drought. Reservoir levels in the state continued to decline, and groundwater wells continued to go dry, the U.S. Drought Monitor says.

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The LA Times reports that California’s historic drought has 14 communities on the brink of waterlessness. It quotes Tim Quinn, executive director of the Association of California Water Agencies, saying that communities that have made the list are often small and isolated and have relied on a single source of water without backup sources.

However, Quinn also tells the LA Times that if the drought continues, larger communities could face their own significant problems.

A recent article at CFO.com by Lauren Kelley Koopman, a director in PwC’s Sustainable Business Solutions practice, makes the point that when water-related disruptions affect operations, companies can suffer significant profit and losses and pay higher prices for goods in the supply chain.

Water management issues pose significant operational, regulatory and reputational risks to companies, the article noted.

And a recent report from the University of California found that farmers had spent an extra $500m in pumping extra water to cope with the state’s drought, while the total economic cost to the state’s agricultural industry reached $2.2bn.

For insurers, droughts can be costly. Drought, wildfires and heat waves caused 29 deaths and $385 million in insured losses in the U.S. in 2013, according to Munich Re.

In 2012, drought in various parts of the U.S. caused $15 billion to $17 billion in insured losses, making it the second costliest disaster after Hurricane Sandy.

An article in The New York Times over the weekend gave a frightening account of the ongoing severe drought across California that is now threatening the state’s water supply.

As farmers, ranchers and homeowners brace for what could be the state’s worst drought in 500 years, The NYT reports that the snowpack in the Sierra Nevada, which supplies much of California with water during the dry season, was at just 12 percent of normal last week, reflecting the lack of rain or snow in December and January.

The NYT quotes Tim Quinn, executive director of the Association of California Water Agencies, saying:

We are talking historical drought conditions, no supplies of water in many parts of the state. My industry’s job is to try to make sure that these kind of things never happen. And they are happening.”

The latest U.S. Drought Monitor, published last Thursday, put 9 percent of the state of California into “Exceptional Drought” – the worst possible category of drought. According to Dr. Jeff Masters’ WunderBlog this is the first time since the Drought Monitor product began in 2000 that a portion of California was put into “Exceptional Drought.”

Meanwhile, parts of the state experiencing “Extreme Drought,” the second worst category of drought, increased to 67 percent.

The U.S. Drought Monitor notes that a few of the impacts within the “Exceptional Drought” areas include fallowing of land, wells running dry, municipalities considering drilling deeper wells, and little to no rangeland grasses for cattle to graze on, prompting significant livestock sell off.

Over at Slate.com Eric Holthaus says that puts the current California drought on par with recent major droughts in Texas (2010-11) and the Midwest (2012), both of which were multibillion-dollar disasters.

For insurers, droughts can be costly too. According to analysis by Munich Re, drought in various parts of the U.S. in 2012 caused $15 billion to $17 billion in insured losses, making it the second costliest disaster after Hurricane Sandy.

Check out I.I.I. information on crop insurance.

It’s mid-July and for many parts of the United States this means persistent hot and dry weather increases the risk of wildfires.

Some 46 percent of the contiguous United States is currently experiencing moderate to exceptional drought conditions, according to Tuesday’s report from the U.S. Drought Monitor.

The first monthly drought outlook from NOAA’s Climate Prediction Center recently warned that drought in the U.S. Southwest is exceptionally intense and unlikely to break completely, despite some relief from the summer thunderstorm season. Most of the already parched West will likely see drought persist or worsen, NOAA said.

Meanwhile, the Wall Street Journal reports that overgrown forest land poses fire risk to a growing number of communities.

It cites U.S. Forest Service statistics that 65 million to 82 million of National Forest lands are at a “high or very high risk of fire” and are in need of restoration.

Between 1960 and 1970, there was only one year, 1969, when wildfires burned more than five million acres in the U.S. In the last decade, it happened eight out of 10 years, the WSJ adds.

As of July 1, some 11 wildfire, heat and drought events have resulted in an estimated $365 million in insured losses in 2013, according to Munich Re.

Aon’s June Global Catastrophe Recap notes that the Black Forest Fire near Colorado Springs became the most damaging fire in Colorado’s history and left two dead. The fire charred 14,280 acres of land and destroyed at least 511 homes. Insurers received at least 4,500 claims with payouts in excess of $350 million. Due to dozens of destroyed uninsured or underinsured homes, the overall economic loss will approach $500 million, Aon added.

On June 30, 19 firefighters were killed while working to contain the Yarnell Hill Fire in Arizona. This is the deadliest event for firefighters since 9/11 and the third highest firefighter death toll attributed to wildfires.

More information is available via Insurance Information Institute (I.I.I.) facts and statistics on wildland fires and droughts and heat waves.