Winter Storms


Most actuaries know about projections that go awry, so we have quite a bit of sympathy for the weather forecasters who missed the mark early this week, says I.I.I.’s Jim Lynch:

Weather forecasts have improved dramatically in the past generation, but this storm was odd. Usually a blizzard is huge. On a weather map, it looks like a big bear lurching toward a city.

This storm was relatively small but intense where it struck. On a map, it looked like a balloon, and the forecasters’ job was to figure out where the balloon would pop. They were 75 miles off. It turned out they over-relied on a model – the European model, which had served them well forecasting superstorm Sandy, according to this NorthJersey.com post mortem.

There are lessons for the insurance industry from the errant forecast and the (as it turns out) needless shutdown of New York City in the face of the blizzard that wasn’t:

  • • Models aren’t perfect. Actuaries, like weather forecasters, have multiple forecasting models. Like forecasters, actuaries have to know the pros and cons of each model and how much to rely on each one given the circumstances. Actuaries and forecasters both bake their own experience into their final predictions.
    Property catastrophe models are considerably cruder than the typical weather forecasting model. By crude I mean less accurate. Cat models project extreme events, where data are sparse and everything that happens has an oversize influence on everything else that is happening. Woe to the insurer that over-relies on cat models, something cat modelers themselves say regularly.
  • • It’s hard to pick up the flag once you have planted it. Forecasters suspected late Monday that New York City would be spared the brunt of the storm, but acknowledge now they were reluctant to make too big a change because it could hurt their credibility, particularly if the new forecast had proved too mild. This is a human failing both by the forecaster and its recipient, both of whom worry about crying wolf.
    The tendency also helps explain why it is hard to project market turns, whether they are from growth to recession or from rising insurance rates to falling.
  • • Policymakers have egg on their faces today, but they appear to have been following sound risk management principles. It’s not unusual to prepare for disasters that don’t happen, something to think about next time you unbuckle a seatbelt or unlock a door. The scale this week was much larger, but the principle was the same. Needlessly closing a subway is better than stranding hundreds on it, and the occasional forecaster’s error is certainly better than the crude prognostication that gave us the Galveston hurricane or the Schoolchildren’s Blizzard.

I.I.I. has Facts and Statistics about U.S. catastrophes in general and winter storms in particular.

Check out this timelapse video of the blizzard hitting Boston:

As the blizzard of 2015 starts to hit hard across the Northeast, with several feet of snow, intense cold and high winds expected, utility companies are warning of widespread and potentially lengthy power outages across the region.

In New Jersey, utility companies say it’s the high winds, with gusts of up to 65 mph, rather than the accumulation of snow, that are likely to bring down trees or tree limbs and cause outages.

Consolidated Edison inc. which supplies electricity to over 3 million customers in New York City and Westchester county, told the WSJ that the light and fluffy snow expected in this blizzard should limit the number of power outages, but elevated power lines could come down if hit by trees.

In Connecticut, Governor Dannel P. Malloy said the state’s two major electric utilities are preparing for 120,000 outages statewide, the Hartford Courant reports. The governor has issued a travel ban for the entire state beginning 9pm Monday.

And in Massachusetts, where thousands of utility company workers have been mobilized, there are also concerns that high winds could delay repairs, with one utility spokesman telling the Boston Globe that this will likely be a multi-day restoration event.

In the event you lose power, you may be wondering about insurance coverage. Here are some points to keep in mind:

–If the power outage lasts for more than a day and you have perishable foods in your refrigerator or freezer, the good news is that food spoilage from the event may be covered under your standard homeowners insurance policy, up to a specified limit, usually anywhere from $500 to several thousand dollars. Typically, the policy deductible does apply to this coverage, however.

–A home would need to be severely damaged by an insured disaster for additional living expenses (ALE) coverage to apply under a standard homeowners policy. In other words, if there is no physical damage to your property but you can’t live at home because of the power outage, in general policies would not pay for you to live elsewhere.

–For businesses, basic property insurance does not cover loss due to power interruption or failure of power to the insured premises if the failure occurs away from the premises. So, if heavy snow topples a power line that is not on an insured’s premises, such as a grocery store, spoilage of food due to the outage would not be covered. If the power outage resulted in a disaster such as a fire at the insured premises, that would be covered.

The Insurance Information Institute (I.I.I.) reviews what winter storm damages are covered by your home and car insurance here. Check out more information on business insurance from the I.I.I. here.

With frigid temperatures and snow expected to fall around the New York City area and other parts of the United States this week, it’s a good time to review how winter storms can impact catastrophe losses.

For insurers, winter storms are historically very expensive and the third-largest cause of catastrophe losses, behind only hurricanes and tornadoes, according to the I.I.I.

Despite below average catastrophe losses overall in 2014, insured losses from winter storms were significant. In fact winter storms in the U.S. and Japan accounted for two of the most costly insured catastrophe losses in 2014.

According to preliminary estimates from sigma, extreme winter storms in the U.S. at the beginning of 2014 caused insured losses of $1.7 billion, above the average full-year winter storm loss number of $1.1 billion of the previous 10 years.

And Aon Benfield’s 2015 Reinsurance Market Outlook notes that a multi-billion-dollar February winter weather insured loss event in Japan was one of the costliest ever for the country’s industry.

Sigma estimates the insured loss payout from that Japan winter storm at $2.5 billion and ranks it as the third costliest insured catastrophe loss of 2014.

What about the year prior?

Winter storms caused $1.9 billion in insured losses in 2013, up dramatically from $38 million in 2012, according to reports from Munich Re.

From 1994 to 2013 winter storms resulted in about $27 billion in insured catastrophe losses (in 2013 dollars), or more than $1 billion a year on average, according to Property Claim Services (PCS).

The good news is that NOAA’s U.S. Winter Outlook predicted early on that a repeat of last year’s winter of record cold and snow is unlikely.

In a release, NOAA’s Climate Prediction Center said:

Last year’s winter was exceptionally cold and snowy across most of the United States, east of the Rockies. A repeat of this extreme pattern is unlikely this year, although the Outlook does favor below-average temperatures in the south-central and southeastern states.”

Winter storms caused $1.9 billion in insured losses in 2013, five times higher than the $38 million in damages seen in 2012, so it’s good to read via NOAA’s U.S. Winter Outlook that a repeat of last year’s winter of record cold and snow is unlikely.

In a release, NOAA’s Climate Prediction Center says:

Last year’s winter was exceptionally cold and snowy across most of the United States, east of the Rockies. A repeat of this extreme pattern is unlikely this year, although the Outlook does favor below-average temperatures in the south-central and southeastern states.”

While the South may experience a colder winter, the Outlook favors warmer-than-average temperatures in the western U.S., Alaska, Hawaii and New England, according to NOAA.

It’s important to note that for insurers, winter storms are historically very expensive and the third-largest cause of catastrophe losses, behind only hurricanes and tornadoes, according to the Insurance Information Institute (I.I.I.).

From 1994 to 2013, winter storms resulted in about $26.6 billion in insured losses, or $1.4 billion a year, on average, according to the Property Claim Services unit of ISO.

Outlook_map_temp2014F

Meanwhile, NOAA’s Winter Outlook also suggests that California’s record-setting drought will persist or intensify in large parts of the state this winter.

Mike Halpert, acting director of NOAA’s Climate Prediction Center, says:

Complete drought recovery in California this winter is highly unlikely. While we’re predicting at least a 2 in 3 chance that winter precipitation will be near or above normal throughout the state, with such widespread, extreme deficits, recovery will be slow.”

The arrival of the first major winter storm of 2014 just two days into the new year makes this a good time to take stock of the insurance implications.

The Insurance Information Institute (I.I.I.) reports
 that winter storms are historically very expensive and are the third-largest cause of catastrophe losses, behind only hurricanes and tornadoes.

From 1993 to 2012, winter storms resulted in about $27.8 billion in insured losses—or $1.4 billion per year, on average, according to Property Claims Service for Verisk Insurance Solutions (see chart below).

Dr. Robert Hartwig, president of the I.I.I. and an economist, notes:

The I.I.I. offers additional facts and statistics on winter storms here.

INFLATION-ADJUSTED U.S. INSURED CATASTROPHE LOSSES BY CAUSE OF LOSS, 1993-2012 (1)
(2012 $ billions)

INFLATION-ADJUSTED U.S. INSURED CATASTROPHE LOSSES BY CAUSE OF LOSS, 1993-2012 (1)

(1) Adjusted for inflation through 2012 by ISO using the GDP implicit price deflator. Excludes catastrophes causing direct losses less than $25 million in 1997 dollars. Excludes flood damage covered by the federally administered National Flood Insurance Program.
(2) Excludes snow.
(3) Includes wildland fires.
(4) Includes losses from civil disorders, water damage, utility service disruptions, and any workers compensation catastrophes generating losses in excess of PCS’s threshold after adjusting for inflation.

Source: The Property Claim Services (PCS) unit of ISO, a Verisk Analytics company.

As this blizzard passes, commentators note that arctic conditions are forecast to continue in its wake. Check out Eric Holthaus’ post at the Daily Beast for the latest.

At least four separate winter storms affected the United States during February causing widespread damage, but insured losses resulting from these events were lower than expected, according to Aon Benfield.

In the latest edition of its monthly Global Catastrophe Recap report, Aon Benfield observes that flooding and active winter weather continued to produce the largest global catastrophe loss events during February 2013.

The U.S. was particularly impacted by a series of powerful winter storms. Steve Jakubowski, president of Impact Forecasting, notes:

While the damage was widespread, economic losses across the affected U.S. states were within the expected range for events of this magnitude, and, in some cases, insured losses were actually lower than might have been expected.”

The most deadly of the winter storms was a powerful Nor-easter which killed at least 15 people and affected more than 60 million citizens. A state of emergency was declared in six states.

The storm brought heavy snowfall of 40 inches in Connecticut, and coastal flooding in Massachusetts – including the city of Boston. Total economic losses were estimated at roughly $100 million, with only a modest number of insurance claims filed.

The report also makes mention of the meteor explosion above Russia’s Urals region that injured 1,491 people. Aon Benfield says:

The blast, which had an energy equivalent roughly 30 times stronger than an atomic bomb, damaged 100,000 homes, 3,000 buildings, 700 schools and 200 hospitals in more than six Russian cities and parts of two Kazakhstan provinces.

Economic losses were listed at RUB1 billion ($33 million), it adds.

Check out I.I.I. facts+stats on global catastrophes.

A major winter storm, with blizzard conditions, is bearing down on the Northeast and New England, with between one and even up to three feet of snow expected in certain areas Friday night through Saturday.

Here in New Jersey the snow is already falling and blizzard warnings are in effect from here to southern Maine, including the New York City metro area and Long Island, Boston, Hartford, Providence, and Portland, Maine.

The National Weather Service warns that in addition to the snowfall amounts, wind gusts as high as 60-75 mph will have a significant impact on transportation and power. Coastal flooding is also possible from Boston northward.

As CNN reports, the storm is on a trajectory similar to that taken by superstorm Sandy.

The Insurance Information Institute (I.I.I.) notes that winter storms are the third-largest cause of catastrophe losses, behind only hurricanes and tornadoes.

From 1992-2011, winter storms resulted in about $28 billion in insured losses, according to ISO. Insured annual U.S. winter storm losses in 2012 totaled $38 million, following losses of over $2 billion in 2011, according to Munich Re.

For more facts and statistics, including the 15 costliest U.S. winters by insured losses click here.

Are you dreaming of a white Christmas? The chances of that happening are revealed in an updated map from NOAA’s National Climatic Data Center (NCDC).

The map shows the climatological probabilities of a white Christmas across the United States.

Based on the most recent 1981-2010 Climate Normals, the Probability of a White Christmas map shows the climatological probability (in percent) that a snow depth of at least 1 inch will be observed on December 25.

Not surprisingly, the highest probabilities are in northern and mountainous areas of the country (see below):

In the words of NCDC:

The actual conditions this year may vary widely from these probabilities because the weather patterns present will determine the snow on the ground or snowfall on Christmas day. These probabilities are useful as a guide only to show where snow on the ground is more likely.”

Time to check out I.I.I. tips on winter proofing your home.

See NCDC’s U.S. Daily Snowfall map to keep track of the snowfall across the U.S. on a daily basis.

A Nor’easter storm brought heavy rains and snow to many parts of the Northeast yesterday.

The National Weather Service defines a nor’easter as a strong low pressure system that affects the Mid Atlantic and New England states and can form over land or over coastal waters.

Nor’easters are most commonly associated with winter storms, but can occur at any time of year.

Here are the Snowpril snow totals so far, courtesy of the Weather Channel.

Over at Wunderblog, Dr. Jeff Masters remarks that we’ve now had two major Nor’easters this season: one in October and one in April:

What’s crazy about this Nor’easter is that it is only the second significant Nor’easter of the 2011-2012 snow season. The other major Nor’easter occurred October 30-31. It’s pretty bizarre to have your only two significant Nor’easters of the season occur in October and April – and none in November, December, January, February and March.”

Dr. Masters adds that word on the street is that NOAA’s National Climatic Data Center will probably end up classifying last year’s October 30-31 Nor’easter as 2011’s 15th billion-dollar weather disaster.

Here’s NOAA’s animation of the storm’s movement April 20-23 from the GOES-13 satellite:

Winter has arrived, at least for the Eastern United States, NOAA’s National Weather Service declared yesterday:

Lake effect and mountain snow is impacting travel across the lower Great Lakes and center Appalachians. Further south, freeze warnings have been issued for all of Florida and along much of the Gulf coast. Temperatures will be at least 20 degrees below average, with brisk north winds making it feel even colder. The temperatures along much of the east coast are below average for this time of year.”

The Insurance Information Institute (I.I.I.) reports that winter storms are historically very expensive and are the third-largest cause of catastrophe losses, behind only hurricanes and tornadoes. From 1991 to 2010, winter storms resulted in about $26 billion in insured losses, according to ISO.

In the first six months of 2011, insured U.S. winter storm losses totaled $1.4 billion, according to Munich Re. That figure does not include losses arising in the second half of the year, for example from the October snowstorm which caused significant damage in the Northeast.

Full year figures should be available in today’s 2011 Natural Catastrophe Year In Review Webinar, jointly presented by Munich Re and the I.I.I.

Insured U.S. winter storm losses in 2010 totaled $2.6 billion, the highest losses from this peril since 2003, as reported by Munich Re.

In its most recent annual winter outlook NOAA gave those of us living in the Northeast and Mid-Atlantic equal chances for above-, near-, or below- normal temperatures and precipitation.

Last year’s Groundhog Day blizzard (January 29-February 3, 2011) was among a record 12 weather disasters in 2011 that each caused $1 billion or more in damages, according to NOAA.

This large, sprawling winter storm impacted many central, eastern and northeastern states leaving at least 36 dead and causing insured losses greater than $1 billion.

The city of Chicago was brought to a virtual standstill as up to 2 feet of snow fell in the area.

As a result of that blizzard the city is now taking a more hi-tech approach in its snow-response. The New York Times reports that a new city web site ChicagoShovels.org includes among other things a snowplow tracker that maps Chicago’s approximately 300 snowplows making their way in real time through the city.

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