Category Archives: Catastrophes

Disaster Preparedness? There’s an App for That

Research tells us that 40 percent of Americans use their smartphone to look up government services or information, so if you’re charging your mobile devices in preparation for Tropical Storm Hermine you might want to download the Federal Emergency Management Agency’s (FEMA) updated disaster app.

The free FEMA app now lets you receive weather alerts from the National Weather Service, so you can get alerts on severe weather happening anywhere in the country even if your phone is not located in the area. This makes it easy to track severe weather—such as a hurricane—that may be threatening you, your family and friends.

Other features of the FEMA app that will help you weather the storm include a customizable checklist of emergency supplies, maps of open shelters and disaster recovery centers, and tips on how to survive natural and man-made disasters.

Important features of the app for after the storm, include a disaster reporter where you can upload and share photos of damage and recovery efforts to help first responders, as well as easy access to apply for federal disaster assistance.

Craig Fugate, FEMA administrator:

“Emergency responders and disaster survivors are increasingly turning to mobile devices to prepare for, respond to and recover from disasters. This new feature empowers individuals to assist and support family and friends before, during, and after a severe weather event.”

The FEMA app is available for free in the Apple store for Apple devices and Google Play for Android devices.

Here at the Insurance Information Institute (I.I.I.) we also recommend you download our award-winning Know Your Plan app which helps you, your family and even your pets prepare to safely get out of harm’s way ahead of the storm.

In addition, the I.I.I. Know Your Stuff home inventory app allows you to keep an up-to-date record of your belongings so you’re fully covered in the event of an emergency.

Both I.I.I. apps are available for iPhone or Android.

Louisiana Flooding Underscores Insurance Need

The ongoing flooding in Louisiana is being described as the worst natural disaster to strike the United States since Superstorm Sandy of 2012.

Latest reports indicate that at least 11 are confirmed dead and more than 30,000 have been rescued. An estimated 40,000 homes have sustained flood damage statewide, but local reports put that figure higher.

Some 20 Louisiana parishes have now received a federal disaster declaration.

Flood damage is excluded under standard homeowners and renters insurance policies, but available as a separate policy both from the National Flood Insurance Program (NFIP) and some private insurers.

So, what would a superstorm Sandy-type event look like in terms of NFIP payouts?

According to the I.I.I., superstorm Sandy was the second costliest U.S. flood, based on NFIP payouts as of June 2016.

“Superstorm Sandy which occurred in October 2012, resulted in $8.2 billion in NFIP payouts as of June 2016, second only to 2005’s Hurricane Katrina with $16.3 billion in payouts.”

There were 130,214 NFIP claims from superstorm Sandy as of June 2016. The average paid loss was $63,352, compared with 167,984 claims from Katrina, with an average paid loss of $97,142.

All these figures are preliminary as claims are still being processed, the I.I.I. notes.

While flood insurance penetration rates are reported to be relatively low in the affected parishes, time will tell how the Louisiana flood stacks up among major U.S. flood disasters.

In 2015 and 2016 the states of Texas, Louisiana, Mississippi, South Carolina and West Virginia have experienced devastating rainfall-induced flooding, resulting in billions of dollars in economic losses.

Here’s a look at the top 10 most significant flood events by NFIP payouts:

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A massive relief operation mounted by the American Red Cross is expected to cost at least $30 million and that number may grow as the scope and magnitude of the devastation in Louisiana becomes clearer.

Check out this I.I.I. issues update on flood insurance for more background on the topic.

Being Prepared for Summertime Flash Floods

Several regions of the country appear to be under flash flood watches and/or warnings as we head into the weekend, underscoring the risk of summertime flooding from slow-moving thunderstorms or excessive rainfall and the need to be prepared.

Weather Underground reports that the threat of flash flooding, and eventually river flooding, will become more widespread from Texas and Louisiana to the Ohio Valley and parts of the Great Lakes in the coming days.

Flash flooding is already reported to be serious in parts of Louisiana and Mississippi as of Friday morning.

Climate scientists believe that the number and volatility of extreme intense precipitation events is on the rise due to the changing climate.

Munich Re describes flash floods as a much underestimated risk:

“While media interest tends to focus on storm surges and river floods, the risk of flooding in places away from rivers and lakes is generally overlooked.”

Flash floods typically occur as independent, localized and random events and unlike river flooding, it’s the intensity rather than the total amount of rainfall that is the concern.

A recent report by FM Global warned that U.S. businesses, depending on their location, should start preparing now for increased, extreme rainfall that a changing climate will likely deliver.

Certain regions of the United States are expected to be prone to more intense precipitation events and a potentially increased risk of flooding, FM Global said. Here’s the graphic:

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Buildings, machinery, data centers, transportation networks, supply chains, people and sales can all be affected by extreme wet conditions, according to the report. When companies have a choice, they should site their facilities in nothing less than 500-year flood zones (where there’s only a 1-in-500 chance of a flood every year), it suggests.

Businesses should also sharpen their focus on water management, diverting water from property, optimizing drainage and protecting water supplies, and considering new weather extremes when managing supply chains.

For any home or business the purchase of flood insurance is key to being prepared for flash flooding, or any kind of flooding event, according to the Insurance Information Institute. Flood damage is excluded under standard homeowners and renters insurance policies, but available as a separate policy both from the National Flood Insurance Program and some private insurers.

Check out these Insurance Institute for Business and Home Safety (IBHS) resources on steps you can take to protect your home or business from flood damage.

Tianjin Anniversary: Better Modeling Benefits Insurers

As we approach the one year anniversary of the explosions at the Port of Tianjin, China, a new report finds that a port’s size and its catastrophe loss potential are not strongly correlated.

Based on the 1-in-500 year estimated catastrophe loss for earthquake, wind and storm surge perils, the surprising analysis by catastrophe modeler RMS, shows that it’s not just the biggest container hubs around the world that have a high risk of insurance loss.

For example, smaller ports such as the U.S. ports of Plaquemines, Louisiana, and Pascagoula, Mississippi, as well as Bremerhaven, Germany rank among the top 10 ports at highest risk of marine cargo loss.

Chris Folkman, director, product management at RMS, said:

“While China may be king for volume of container traffic, our study found that many smaller U.S. ports rank more highly for risk — largely due to hurricanes. Our analysis proves what we’ve long suspected — that outdated techniques and incomplete data have obscured many high-risk locations.”

RMS’ analysis shows the riskiest two ports are in Japan (Nagoya – $2.3 billion) and China (Guangzhou – $2 billion), and that six of the top 10 riskiest ports are in the U.S., with the remaining two in Europe (see chart below).

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The findings come after four years of marine catastrophes which have generated billions of dollars in marine insurance losses: 2015 Tianjin explosion (more than $3 billion); 2012 Superstorm Sandy (est. $3 billion marine loss, of which approximately $2 billion cargo loss); and the 2011 Tohoku earthquake and tsunami.

The Tianjin loss ranks among the largest man-made insured global loss events in history, with an estimated total insured property loss of up to $3.5 billion.

To conduct its analysis RMS marine risk experts used the new RMS marine cargo model, which takes into account cargo type, precise storage location, storage type, and dwell time to determine port exposure and accumulations.

RMS suggests that better data and modeling are key for more effective portfolio management and underwriting.

Check out Insurance Information Institute facts and statistics on man-made disasters here.

Wildfire Smoke Travels

Two wildfires in California prompted officials to issue air pollution warnings almost 200 miles away in Nevada this week, reminding us that wildfire exposure reaches far beyond the flames.

The Soberanes fire which is located in the Monterey County area is currently 23,688 acres in size and is 10 percent contained. The Sand Fire, which began on July 22, quickly grew to more than 30,000 acres and is now 38,346 acres in size and 40 percent contained.

In the first six months of 2016 there were 26,510 wildfires across the United States, compared to 29,078 wildfires in the first half of 2015, according to statistics from the National Interagency Fire Center, as reported by the Insurance Information Institute (I.I.I.).

Over the 20-year period 1995 to 2014, fires—including wildfires—accounted for 1.5 percent of insured catastrophe losses in the United States, totaling about $6 billion, according to the Property Claims Services (PCS) unit of ISO.

Smoke, soot and ash produced by large wildfires present a risk to property and life in the fire zone, not to mention a potential health risk to residents living in the path of the smoke.

It’s important to recognize that even if a property doesn’t suffer direct damage from flames in a wildfire, it may be exposed to extensive smoke, soot and ash damage.

From the insurance perspective, damage caused by fire and smoke are covered under standard homeowners, renters and business owners policies and under the comprehensive portion of an auto insurance policy.

However, it’s important to notify your agent or insurer of this damage on a timely and proper basis.

Water losses or other damage caused by fire fighters while extinguishing a fire is also covered under these policies.

Here’s a visual of the smoke from the California wildfires, courtesy of NOAA and Weather Underground:

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Check out I.I.I. claims filing tips here.

Billion-Dollar Insured Disaster Events Add Up

The first half of 2016 saw at least six individual billion-dollar insured disaster events globally, three of which occurred in the United States, according to Aon Benfield’s Global Catastrophe Recap: First Half of 2016.

Four of these events crossed the multi-billion dollar threshold ($2 billion and greater).

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As seen in the chart above the most costly event was a series of earthquakes that struck Japan’s Kumamoto prefecture in April with total insured losses—including losses due to physical damage and business interruption—expected to total in excess of $5 billion.

Other major loss events in the first half included:

—the late May and early June flooding and severe weather (Storm Elvira) in Europe ($3.4 billion insured losses);

—the Fort McMurray wildfire ($3.2 billion insured losses);

—the April 10-15 severe convective storm outbreak in the central United States ($3.2 billion insured losses).

Aon Benfield notes that all of the estimates from both public and private insurers are subject to revision as losses are further developed.

A deeper dive into the data reveals that there were at least 14 events that minimally cost insurers $500 million in the first half of 2016, eight of which were recorded in the U.S. and were all severe convective storm or flood-related.

Globally, public and private insurers endured an elevated level of disaster losses—$30 billion—during the first half of 2016, some 60 percent higher than the $19 billion sustained in 2015. The U.S. sustained the highest level of insurable losses at $14 billion.

The aggregated $30 billion was only the third time on record that first and second quarter losses reached that threshold—even after adjusting for inflation to today’s dollars, Aon Benfield said.

Check out Insurance Information Institute facts and statistics on global catastrophes here.

Thunderstorms Most Costly U.S. Nat Cat in H1 2016

Severe thunderstorms accounted for the lion’s share of U.S. natural disaster losses in the first half of 2016, according to Munich Re.

Of the $17 billion in U.S. economic losses ($11 billion insured) caused by natural catastrophes in the first half of 2016, some $12.3 billion ($8.8 billion insured) were due to a series of storms in Texas and neighboring states, including destructive hailstorms in Dallas and San Antonio, and severe flooding in the Houston metro area.

Winter storms and cold waves were the next most costly U.S. peril in the first half causing insured losses of $1.5 billion, followed by flood and flash flood events with $1 billion in insured losses.

Wildfire, heatwaves and drought resulted in minor insured losses, and there were no losses due to earthquake or tropical cyclones in the first half, according to Munich Re’s Nat Cat Update.

USNatCatLosses2016H1MunichRe

Weather extremes in Texas and other southern states are symptomatic of an El Niño phase, which intensifies the subtropical jet stream, which can cause an increase in severe storms in the region, Munich Re said.

Further north, El Niño conditions also caused warm and dry conditions in Alaska and western Canada, helping to trigger the worst wildfire in Canadian history. Direct losses from these fires totaled $3.6 billion, of which $2.7 billion were insured.

The Fort McMurray fire has been declared the costliest natural catastrophe event in Canada’s history.

One beneficial aspect of El Niño conditions is that it tends to reduce springtime tornado activity over the southern Great Plains. While the year’s thunderstorm season got off to an early start, the states of Texas, Oklahoma, and Kansas have all seen about 50 percent fewer tornadoes this year than in the first half of 2015, Munich Re observed.

Nationally, the number of observed tornadoes was about 700 by the end of June, significantly below the average of 1,021 for the last 10 years.

Tony Kuczinski, president and CEO of Munich Re America, Inc, noted that homes and businesses incur the brunt of thunderstorm losses.

“Property damage from this spring’s thunderstorm season remind us that a roof is a building’s first line of defense against hail and wind events. Proper roof maintenance, roofing materials and installation are all critical to helping reduce these types of losses.”

To help homeowners build safer, stronger structures in the face of increasing severe weather events, Munich Re and the Insurance Institute for Business and Home Safety (IBHS) recently launchd an app that walks homeowners, contractors and architects through the home strengthening process.

FORTIFIED HomeTM On the Go can be downloaded free from the iTunes Store.

U.S. natural catastrophes accounted for almost one quarter of worldwide economic losses in the first half of 2016, and about 58 percent of global insured losses.

June Flood Losses Highlight Insurance Protection Gap

The economic cost of flood losses worldwide in June will exceed $5 billion, though the insured loss portion will be significantly less, according to Aon Benfield’s latest Global Catastrophe Recap.

Impact Forecasting, the cat modeling center of Aon Benfield, reports that major June floods highlighted by China and U.S. events, saw the global economic toll mount.

Seasonal “Mei-Yu” monsoon rains led to multiple rounds of significant flooding across central and southern parts of China throughout June, resulting in more than 130 fatalities.

The most damaging floods occurred in the Yangtze River basin as rivers and tributaries overflowed their banks and minimally inundated 200,000 homes. Beyond property damage, there were substantial impacts to the agricultural sector.

Impact Forecasting said:

“Total aggregated economic losses were estimated by the Ministry of Civil Affairs at upwards of CNY29 billion (USD4.4 billion). Given low penetration levels, the insured loss portion was only a small fraction of the overall damage cost.”

Exceptional rainfall in the U.S. state of West Virginia also led to catastrophic flooding in several counties. The federal government declared a disaster after major damage occurred in Clay, Fayette, Greenbrier, Kanawha, Monroe, Nicholas, Roane, and Summers counties, As many as 5,500 homes and 125 businesses were damaged or destroyed.

“Total economic losses were anticipated to reach into the hundreds of millions of dollars. The insured loss portion of the loss was expected to be less given rather low up-take in the National Flood Insurance Program (NFIP).”

Additional major flood events in the month of June occurred in India, Indonesia, Myanmar, and Ghana, according to the report.

The gap between economic and insured losses for both major flood events in China and the U.S. illustrates the need for greater insurance penetration around the globe.

A 2015 Swiss Re report estimated the current annual disaster protection gap between insured and total losses at around $153 billion, assuming an average catastrophe loss year.

In absolute terms, the U.S., Japan and China account for more than half that amount, with a combined annual shortfall of $81 billion, Swiss Re said.

A 2015 poll by the Insurance Information Institute found that 14 percent of American homeowners had a flood insurance policy. This percentage has been at about the same level every year since 2009.

Global Insured Disaster Losses in May: $7 billion and Counting

At least $7 billion—that’s how much global disasters and severe weather are expected to cost insurers and reinsurers in May.

Aon Benfield’s latest Global Catastrophe Recap Report notes that the Fort McMurray wildfire in Alberta, Canada, will become the costliest disaster in the country’s history.

Insured losses—including physical damage and business interruption—are expected to be in excess of $3.1 billion, while total economic losses will be well into the billions of dollars.

The fire charred more than 580,000 hectares (1.43 million acres) of land and destroyed at least 10 percent of Fort McMurray, including more than 2,400 homes and other structures.

Remarkably, no direct casualties were reported from the event as it prompted the largest evacuation in the history of Alberta.

Adam Podlaha, global head of Impact Forecasting, says:

“The severity of wildfire damage in Fort McMurray is an unfortunate reminder of how significant insurable losses can be from the peril.”

And:

“Since this is just the sixth individual global wildfire to surpass the billion-dollar threshold for insurers, there is not a lot of precedent for a fire event of this magnitude.”

Check out Insurance Information Institute wildfire facts and statistics here.

Elsewhere, severe weather and flooding in Europe where the storm ‘Elvira’ swept across parts of northern Europe between late May and early June caused most damage in Germany, France, Austria, Poland and Belgium, where floods impacted many major metro regions, including Paris.

Preliminary estimates from industry associations in France (MAIF) and Germany (GDV) put the estimated combined minimum claims payouts at in excess of $2.3 billion, while overall economic damage is tentatively estimated at $4.6 billion.

May also saw no fewer than five outbreaks of severe convective storms in the United States, affecting parts of the Plains, Midwest, and Mississippi Valley. Storm-related flooding also caused major damage in parts of Texas.

Total aggregated insured losses were estimated at over $1 billion, Aon’s Impact Forecasting unit said.

Meanwhile, Cyclone Roanu brought torrential rain to Sri Lanka, eastern India, Bangladesh, Myanmar and China during May, damaging or destroying nearly 125,000 homes and structures across all five countries. Estimated reconstruction costs were put at $1.7 billion, though insured losses are substantially less due to low insurance penetration.

Even after all that, May was not done, with other notable natural hazard events around the globe, including:

—Five separate instances of flooding impacted China as aggregated economic losses topped $1.5 billion. Most of the damage was attributed to agricultural interests.

—Other major flood and landslide events in May were reported in parts of Hispaniola, Kenya, Tajikistan, Afghanistan, Rwanda, Ethiopia, India and Yemen.

—Tropical Storm Bonnie brought heavy rainfall to portions of the Carolinas and Georgia in the United States at the end of May and into June. Total economic losses were expected to be minimal.

—Earthquakes in Ecuador and China caused damages to thousands of homes and a winter weather outbreak in northern China caused damage to crops totaling $61 million.

Canadian Wildfire Underscores Risk

If ever there were an example of the real danger posed by wildfires, the Fort McMurray wildfire in Alberta, Canada is it.

Firefighters are struggling to control this massive fire that started last Sunday, is estimated to have destroyed more than 1,600 structures in Fort McMurray and has resulted in more than 80,000 evacuations.

As gccapitalideas.com reports here, record high temperatures exceeding 32 C (90 F) and extremely dry air, together with strong winds have enabled the wildfire to grow and spread rapidly.

AIR Worldwide also reports:

“With very few exceptions, catastrophic wildfires occur when three conditions are met simultaneously: dry heat maximizes the volatility of vegetation; extreme winds, which can drive the propagation of a fire through that vegetation, occur; and a fire ignites close to a moderately or heavily populated area.”

All three of these conditions have occurred in the Fort McMurray vicinity, and AIR Worldwide notes: “the wildfire that is now happening there is certainly catastrophic.”

While it is too soon to know the extent of the damage and the size of the Fort McMurray wildfire insurance loss, some early reports are helpful.

AIR Worldwide makes the important point that because of the oil industry, housing in the Fort McMurray area is more expensive than its remoteness would suggest and already it is clear that there has been a massive loss of property.

Losses arising from this fire will likely far exceed those resulting from the Slave Lake wildfire in 2011 that destroyed 522 homes and structures, it suggests. The Slave Lake wildfire cost insurers more than C$700 million at the time, according to the Insurance Bureau of Canada.

One analyst at Bank of Montreal observed that if Fort McMurray has to be completely rebuilt, insured losses could reach as high as C$9 billion ($7 billion), making this the costliest insured disaster in Canadian history.

This catastrophe is also a reminder that wildfires pose a significant risk across the United States.

For more on how to protect property from wildfire damage and to reduce the costs associated with wildfire damage check out information from the Insurance Institute for Business and Home Safety (IBHS).