Archive for August, 2011

As damage estimates start to be reported for Hurricane/Tropical Storm Irene, there is a growing consensus that much of the damage appears to have been caused by flooding rather than wind.

For example, in Vermont where the National Guard has begun airdropping supplies into flooded areas, Governor Peter Shumlin said Irene had resulted in the worst flooding the state has seen in a century.

Given the timing of Hurricane Irene, close to six years since Hurricane Katrina, it’s inevitable that this will lead some to draw comparisons.

PropertyCasualty360.com has an interesting piece on why it’s possible the insurance industry will face similar issues that arose with Hurricane Katrina and its wind vs. water discussion.

While it’s too early to tell just yet what proportion of Irene damage is the result of flooding, it’s important to reiterate that flood damage is excluded under standard homeowners, renters and commercial insurance policies.

Flood insurance is available through the federal government’s National Flood Insurance Program (NFIP) and through some private insurers.

An online article at Knowledge@Wharton has some interesting observations on this issue.

It cites experts at the Wharton Risk Center saying that based on their analyses of NFIP data, it is very likely that many homeowners with damage from Hurricane Irene will not have purchased flood insurance even if they are required to have it.

According to Howard Kunreuther, co-director of Wharton’s Risk Management and Decision Processes Center and cited in the article, it is also unlikely homeowners will have invested in measures to reduce losses from hurricanes.

As Kunreuther states:

Irene provides an opportunity to get the message across that ‘it can happen to me’ so that [people] will decide to undertake protective measures prior to the next disaster rather than after it occurs.”

Check out I.I.I. facts and stats on flooding.

As clean up efforts get underway on the U.S. East Coast and in the Northeast following Hurricane Irene, one question on many peoples’ minds is whether their insurance covers fallen trees.

The good news is that if a tree hits a home or other insured structure due to wind, standard homeowners policies provide coverage for the damage the tree does to the structure and the contents in it.

It does not matter whether or not you own the tree. If it lands on your home, you should file a claim with your insurance company, the I.I.I. says.

If a tree hits an insured structure, such as your house or garage, there is also coverage for the cost of removing the tree, generally up to about $500 to $1,000, depending on the insurer and the type of policy purchased.

The I.I.I.’s Jeanne Salvatore has the answers to your fallen tree questions in this video:

It’s been quite the weather week for those of us on the East Coast, with the Virginia earthquake and the imminent landfall of Hurricane Irene.

This morning we woke to the reality of a hurricane watch in effect for a large swathe of the north east from New Jersey to Massachussetts, including New York City, Long Island, Long Island Sound, Block Island, Boston, Marthas Vineyard and Nantucket.

Just to be clear, a hurricane watch means that hurricane conditions are possible within the watch area. A watch is typically issued 48 hours before the anticipated first occurrence of tropical storm-force winds.

As of 8am EDT the National Hurricane Center (NHC) reports that Irene, currently a category 2 hurricane on the Saffir-Simpson scale, is located some 375 miles south southwest of Cape Hatteras, North Carolina, and moving to the north near 14 miles per hour.

NHC says that some re-intensificaton is possible and Irene is expected to be near the threshold between Category 2 and 3 as it reaches the North Carolina coast Saturday.

As Irene heads north, an important statistic is that five of the top 10 states in terms of the value of insured coastal property vulnerable to hurricanes are situated in the northeast.

New York, Massachusetts, New Jersey, Connecticut, and Maine have some of the highest insured coastal property values in the country, according to the I.I.I.

Figures compiled by catastrophe modeler AIR Worldwide show the total value of insured coastal exposure in these five states was $4.4 trillion in 2007. That’s about half the $8.9 trillion value of insured coastal property in hurricane prone states as a whole.

As we continue to track Irene, the I.I.I. reminds that in addition to wind, heavy flooding from storm surge and torrential rains caused by hurricanes also can cause major damage.

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

It may come as some surprise, but the top 10 most costly flood events in U.S. history are associated with hurricanes and tropical storms, with insured flood losses from Hurricane Katrina topping the list at $16 billion.”

The I.I.I. also notes that many still lack flood insurance as hurricane season nears its peak.

Hurricane Irene has become a Category 3 hurricane with maximum sustained winds increasing to near 115mph and  additional strengthening is possible.

That’s the latest forecast from the National Hurricane Center (NHC) in its 8am EDT advisory.

The core of Irene will move across the southeastern and central Bahamas today and over the Northwestern Bahamas tomorrow. Irene is then forecast to track up the Mid-Atlantic and Eastern seaboard.

According to the NHC, Irene’s hurricane force winds extend outward up to 40 miles and tropical storm force winds up to 205 miles from the center.

This raises an important point. Regardless of where or whether Hurricane Irene makes U.S. landfall, storm-related winds, storm surge, rainfall and surf are all potential hazards that coastal residents from the Carolinas to Maine may face on land.

Over at Wunderblog, Dr. Jeff Masters yesterday warned that Irene is a potential multi-billion dollar disaster for New England and the mid-Atlantic:

If Irene ends up skirting the Outer Banks of North Carolina and not significantly weakening, then plowing through the mid-Atlantic and New England states as a Category 1 or 2 hurricane, it could become one of the ten most damaging hurricanes in history.”

Check out I.I.I. hurricane facts and stats and I.I.I. hurricane fact files by market share and state.

The NHC graphic below shows Irene’s tropical storm force wind probabilities for the next five days.

[Image of probabilities of tropical storm force winds]

This year marks the 10th anniversary of 9/11 and the cost of terrorism still looms large in United States history.

After close to 10 attack-free years, the $32.5 billion in losses paid out by insurers for the terrorist attack of September 11, 2001, places second in an I.I.I. ranking of the most costly U.S. catastrophes – after just Hurricane Katrina (2005).

As America pauses to reflect on the decade since 9/11, a new book by experts from the RAND Corporation points out that the United States has made many mistakes in its response to the 9/11 attacks and significant attention is needed to correct the nation’s path.

Those errors include overconfidence in rebuilding Afghanistan, launching a war in Iraq that did little to weaken al Qaeda, and many actions that aided jihadist recruiting by fostering resentment toward the U.S., such as the detainee abuse committed at Abu Ghraib prison.

A key insurance-related topic covered by one of the essays in the book is how to compensate victims of terrorism where some early solutions may soon disappear.

In this essay RAND economist Lloyd Dixon and colleagues point out that when the latest extension of the Terrorism Risk Insurance Act of 2002 expires at the end of 2014, the nation will be without a system to fund insurance against losses from terrorist attacks.

The authors suggest that creating a rational compensation system to aid those hurt by terrorism can promote social cohesion and national unity, and contribute significantly to both social and economic resiliency.

“The Long Shadow of 9/11: America’s Response to Terrorism” is available at www.rand.org

As the 10th anniversary of 9/11 approaches, a new I.I.I. video featuring I.I.I. president Dr. Robert Hartwig discusses the impact of the event.

Also check out the recently updated I.I.I. paper “Terrorism Risk: A Reemergent Threat”.

Severe weather at an outdoor festival has proved deadly for the second time in less than a week.

At least five people are reported dead and dozens injured after a stage collapsed in heavy storms during a set by the Smith Westerns at the Pukkelpop Festival in Hasselt, Belgium yesterday.

Rolling Stone reports that this is the fourth major stage collapse incident this summer.

Just last weekend a stage collapsed onto the audience during a storm at the Indiana State Fair just as the band Sugarland was about to take the stage. Six people have died and some two dozen have been injured.

PropertyCasualty360.com has more on the insurance implications of this tragic event.

Earlier in August extreme weather caused a video screen to collapse as the band Flaming Lips was about to take the stage at Tulsa’s Brady Block Party in Oklahoma, and in July the stage collapsed from beneath the band Cheap Trick at the Ottawa Bluesfest in Canada during a severe windstorm.

These events underscore the importance of safety and risk management when it comes to outdoor events, such as concerts, festivals and fairs.

An Associated Press article via CSI Special Event Insurance notes that concert events have increased in size and scale, becoming more elaborate and often involving tons of lighting and video equipment.

AP also notes that there are no standard safety regulations for outdoor events.

Special events insurance can provide a range of coverages such as event cancellation, bodily injury, venue liability and workers’ compensation. Coverage can be tailored for a specific event to meet the risks involved.

About a year ago, we posted on the increasing use of social media in disasters.

A survey from the American Red Cross had shown that web users increasingly rely on social media to seek help in a disaster, and expect first responders to be listening.

Fast forward to today and according to L.A. NOW, a blog at the Los Angeles Times, a summer marked by social media-fueled riots in England and flash-mob violence in a number of U.S. cities, including Philadelphia and Cleveland, has prompted a debate about a social media crackdown.

L.A. NOW reports that rioters in and around London used BlackBerry messages to plan attacks, leading British Prime Minister David Cameron to suggest shutting down access to social media for anyone suspected of using it for criminal activity.

And after a large flash mob disrupted a Fourth of July fireworks display with violence here in the U.S., the Cleveland City Council passed an ordinance that would have made it illegal to use social media to organize a violent and disorderly flash mob. The mayor eventually vetoed the measure, citing First Amendment concerns.

Also, just last week officials at the Bay Area Rapid Transit District (BART) shut down its cell phone service to disrupt a protest over the shooting of a homeless man.

This raises an important question of whether officials legally can crack down on social media.

According to L.A. NOW:

Legal experts say police face a delicate balance when cracking down on social media — and prosecutors would have to meet a high bar to show that irresponsible, even reckless tweeting amounts to a crime.”

Across the Pond, an article in the London Guardian newspaper makes the point that police thwarted planned attacks on the Olympics site and stores in Oxford Circus, after gleaning intelligence from encrypted social messaging sites such as BlackBerry Messenger and also Twitter.

The Guardian also says police had considered switching off certain social messaging sites, but discovered they did not have the legal powers to do so.

In the words of acting Metropolitan police commissioner, Tim Godwin, cited by The Guardian:

We did consider seeking the legal authority to switch it off. The legality is questionable, very questionable.”

What do you think?

The Deepwater Horizon disaster is just over a year old, but litigation arising from the explosion and oil spill is expected to unfold over the course of many years.

On Friday, the federal judge appointed to hear cases following the disaster, set out his plan for the trial that will start as scheduled on February 27, 2012.

At a monthly status conference on the oil spill litigation U.S. District Court Judge Carl Barbier said the trial will unfold in three phases. According to a report by Rebecca Mowbray of The Times-Picayune:

The initial “incident phase” of the trial will examine the role of the various defendants in the loss of well control, the explosion and sinking of the Deepwater Horizon drilling rig and the initiation of the flow of oil.”

The Times-Picayune notes that after a break, the court is expected to begin the second phase of the trial focusing on efforts to control and shut down the well and how much oil was actually lost.

A third phase would deal with other liability issues, such as efforts to skim and burn the oil, the use of dispersants and boom.

Some 549 cases over the April 2010 well-blowout and 86-day oil spill have been consolidated in Judge Barbier’s court, and 108,000 individuals have filed claims alleging harm, according to The Times-Picayune article.

Some 11 crewmen lost their lives in the explosion and fire that resulted in the April 22, 2010 sinking of the Deepwater Horizon oil rig in the Gulf of Mexico. The explosion of the rig, which caused $1 billion in insured property losses, was the biggest man-made disaster of 2010 (not including liability losses) and the tenth most costly insured catastrophe loss of 2010, according to Swiss Re.

Check out I.I.I. facts and stats on energy.

Meteorologists from Accuweather.com say indications are that the tropical Atlantic will give birth to several storm systems over the next few weeks.

Alex Sosnowski, expert senior meteorologist at Accuweather.com says:

It is possible that we will plow through at least three named systems by August 25:  Franklin, Gert and Harvey.

August is a time when the Cape Verde storms (tropical systems that originate from the Cape Verde Islands near Africa) begin to ramp up, while the risk of near-shore formation of storms continues.”

According to the National Hurricane Center, two areas of low pressure in the eastern Atlantic Ocean have a medium chance of developing into tropical cyclones during the next 48 hours.

Just last week NOAA’s Climate Prediction Center raised the number of expected named storms for the 2011 Atlantic hurricane season.

NOAA now expects 14 to 19 named storms, up from its earlier forecast of 12 to 18, while the expected number of hurricanes also increased to 7 to 10 (from 6 to 10).

Check out I.I.I. facts and stats on hurricanes.

Riots in London and other major cities across the United Kingdom have left many individuals and businesses with damaged or destroyed property.

The latest from the Association of British Insurers (ABI) puts the estimated insured losses from the urban unrest at well over £100 million ($163 million). Check out this Business Insurance article for more details.

Watching the destruction unfold online and on TV I had to wonder, if a similar outbreak were to occur near my U.S. home, would I be covered?

The good news is that standard homeowners insurance policies generally cover a wide range of potential disasters, including fire, riot or civil commotion, and vandalism or malicious mischief. This I.I.I. chart lists what type of disasters are covered.

Of course, it’s always best to check your individual policy for coverage details and exclusions.

As for U.S. businesses, commercial policies generally cover riot-related property damage.

When it comes to business interruption coverage, insurance will compensate you for lost income if your company has to vacate the premises due to disaster-related damage that is covered under your property insurance policy, such as a fire. However, if a business is forced to close early due to a city-imposed curfew, business interruption coverage would not apply for the lost income.

While rioting is rare, when it does occur, the damages can be costly to both people and property. The 1992 Los Angeles riots in the wake of the Rodney King verdict caused some $775 million in insured losses and still rank among the largest U.S. manmade disaster losses.

It’s interesting to note that U.S. property insurers of last resort, also known as FAIR plans, were born out of legislation passed by Congress following the 1967 urban riots.

More on the history of property insurance pools and riots can be found in the I.I.I. issues update on Urban Insurance.