Category Archives: Flood Insurance

Coastal Flooding Exposure

Hot on the heels of yesterday’s posting about modeling and as the UN Climate Change Conference continues in Bali, the release of a global study on coastal flooding by the OECD, RMS and the University of Southampton is timely. The study makes a first estimate of the exposure of the world’s largest port cities to coastal flooding due to storm surge and damage due to high winds. It also investigates how climate change is likely to impact each port city’s exposure to coastal flooding by the 2070s, alongside subsidence and population growth and urbanization. The upshot is that the total population  reliant on flood defenses  could more than triple from 40 million today to around 150 million people by 2070. In the same period, total assets exposed will grow even more dramatically, more than 10 times current levels reaching $35,000 billion. The findings are ominous for a number of U.S. cities, with Miami topping the list in terms of assets exposed to coastal flooding ($416.3 billion today and increasing to $3,513 billion by the 2070s). New York-Newark places third with exposed assets of $320.2 billion, rising to $2,147 billion by the 2070s. New Orleans ranks 12th, with $233.7 billion in exposed assets, rising to $1,013 billion by the 2070s, while Virginia Beach ranks 19th, with $84.6 billion in current exposed assets, increasing to $581.7 billion by the 2070s. How to put in place effective climate change policies and disaster management strategies are just some of the challenges the study highlights. Check out I.I.I. facts & stats on flood insurance.

Tsunami Factor

Look back at a list of major earthquakes through the years and you’ll see a number of related tsunami events. Perhaps the most memorable in recent history was the December 26, 2004, magnitude 9.0 earthquake in the Indian Ocean, that triggered a series of tsunami (tidal waves) and left some 220,000 people dead. In an I.I.I.  chart of the 10 deadliest world catastrophes between 1970 and 2006, that event ranks third. So yesterday’s announcement by the National Oceanic and Atmospheric Administration (NOAA) that it has completed high-resolution digital elevation models to prepare three east coast communities for tsunami and storm-driven flood threats is a welcome step. The latest models for Long Island, Atlantic City and Daytona Beach provide the framework to accurately forecast the magnitude and extent of coastal flooding during a tsunami or storm surge event. They add to models already in place for some 20 U.S. coastal communities and NOAA expects to build 50 more models in the coming years. Check out further I.I.I. info on flood insurance.  

On The Hill Update

A quick update on the terrorism and flood measures in the Senate. The bill to further extend the federal terrorism risk insurance program passed the Senate Banking Committee by a vote of 20-1 yesterday. The Senate bill would extend the program for a further seven years from its upcoming expiry December 31. Undoubtedly this is a positive step, as a continued federal terrorism risk insurance program is critical to ensuring that terrorism insurance remains available to those businesses that want and need the coverage. The White House also said it would back the Senate version, another positive development. While the bill does not expand the program to cover chemical, nuclear, biological and radiological (CNBR) terrorism, it does require a study into the existing insurance market for CNBR by the Government Accountability Office (GAO). On what was a busy day, the same Senate Committee also approved legislation to reform the National Flood Insurance Program (NFIP). The contentious issue of adding windstorm coverage to the flood program was not included in this measure. For more on the risks posed by expanding the NFIP to include windstorm, check out I.I.I. president Dr. Robert Hartwig’s testimony delivered before the U.S. House subcommittee on Housing and Community Opportunity earlier in July.  

Flood Accumulations

A month ago we blogged about flood events in the U.S. and U.K. (see June 28 posting) and pointed to the fact that flooding is not just a coastal issue. Now severe flooding of major rivers in England, including the Thames and Severn, has re-flooded some of the previously-hit areas, resulting in what has been described as the worst flooding to hit Britain in 60 years. In early July, the Association of British Insurers (ABI) estimated the insured losses from the June floods at  £1.5 billion ($3.1 billion). Taking into account the fresh floods, that total could now reach  £3 billion ($6.2 billion). The event illustrates how critical it is for insurers to identify and manage accumulation risk. With that in mind, we note that Guy Carpenter has announced the development of a new London flood catastrophe model for insurers. As GC’s press release states: “For insurers and reinsurers, London represents the greatest accumulation of exposure and thus the ability to accurately determine maximum potential flood loss has become an imperative for risk managers.† Check out further I.I.I. info on catastrophe modeling and flood insurance in the U.S.  Ã‚  

NFIP Hearing

A bill (H.R. 920) that would amend the National Flood Insurance Act of 1968 to allow the National Flood Insurance Program (NFIP) to cover wind-related losses will be the focus of a hearing on Capitol Hill tomorrow before the House Financial Services Subcommittee on Housing and Community Opportunity. Otherwise known as the Multiple Peril Insurance Act of 2007, H.R. 920 was introduced earlier this year by Rep. Gene Taylor, D-Miss. Among those testifying tomorrow will be I.I.I. president and chief economist Dr. Robert Hartwig. Check the I.I.I. site for further  facts on the NFIP and for copies of Dr. Hartwig’s testimony.

Flood Risk Defenses

Flood events during the past fortnight in the U.S. and U.K. illustrate the scale and impact of this type of disaster and also underscore the point that flooding is not just a coastal issue. In central Texas more than 18 inches of rain have fallen in the space of two days in the Marble Falls area northwest of Austin. In fact record rains in Texas and Oklahoma in the course of the past two weeks have resulted in 11 fatalities. Meanwhile, severe floods in England and Wales have caused at least four fatalities and left more than 600 injured. We note that among the most seriously affected areas are the inland counties of Cambridgeshire, Derbyshire, Gloucestershire, Nottinghamshire, Shropshire and Staffordshire. Of course a key difference is that homeowners and business insurance policies in the U.K. do cover flood damage, while in the U.S. flood insurance is available mainly through the National Flood Insurance Program (NFIP). That said, the Association of British Insurers (ABI) has made clear that U.K. insurers will only continue to be able to offer flood insurance if defenses are adequately maintained. With that in mind, we leave the final word to the head of the U.K.’s Environment Agency, Baroness Young. Describing the U.K. floods as “a one in 150-year event†, Baroness Young called for more investment in flood defenses and for people to think hard about building on flood plains. Hear, hear. Check out I.I.I.’s flood statistics for more information.

Hurricane Hearings

A busy day on Capitol Hill tomorrow as a joint public hearing titled “National Flood Insurance Program: Issues Exposed by the 2005 Hurricanes† will be held before the Financial Services and Homeland Security Oversight Subcommittees. The hearing is expected to explore public and private sector insurance practices in the wake of the 2005 hurricanes. Specifically, the interaction between the National Flood Insurance Program (NFIP) and private insurers and the allocation of wind vs. water insurance claims will be examined. Later in the day, a hearing before the U.S. Senate Judiciary committee will focus on “Rising violent crime in the aftermath of Hurricane Katrina†. Check out I.I.I.’s flood insurance stats and hurricane insurance facts.

Season Opening

So, the 2007 hurricane season is upon us. And on the eve of the official start, Colorado State University’s Tropical Meteorology Project released its latest forecast. Similar to its earlier prediction, the call is still for 17 named storms, 9 hurricanes, 5 of which will be intense (Category 3-4-5). The probability of a major hurricane hitting the U.S. coastline is at 74 percent, while there is a 50 percent probability of a major hurricane hitting the East Coast, including the Florida Peninsula, and a 49 percent chance of the same for the Gulf Coast. All these figures are well above the long-term averages. As the season progresses, check out I.I.I.’s catastrophe update and flood insurance facts for further information. The vital role played by the industry in defraying the cost of catastrophes is also detailed in the Institute’s online publication “A Firm Foundation†.  The I.I.I.’s disaster information Web site is another useful resource.

Communication on Flood

Yesterday marked the official countdown to the start of the 2007 hurricane season. It’s now just 29 days away, but as we know there’s a 30-day wait before a flood insurance policy takes effect, so this is a good time to remind people of the importance of flood insurance. By the way, if you were wondering, Sacramento voters have agreed to pay a higher assessment tax to finance municipal flood protection initiatives that will eventually provide a 200-year level of protection to the region (see our  April 26 posting). All well and good, but we’re curious as to how this will affect the purchase of flood insurance? Communicating the risk  remains crucial, according to a new report from the Water Policy Collaborative at the University of Maryland. It makes clear that levees in urban areas should provide protection to at least a 500-year flood standard. In fact for homes outside of the 100-year floodplain but within the 500-year floodplain there is still a six percent chance of at least one 500-year flood event during a 30-year mortgage. The study recommends that FEMA seek legislative authority to require mandatory purchase of flood insurance by those living in the 500-year floodplain and those living behind levees. So let’s get the message out there.  

Sacramento Flood Vote

We’re going west today to Sacramento, California, where the results of the Sacramento Area Flood Control Agency’s (SAFCA) special assessment election are due. Ballots were mailed in March to approximately 140,000 property owners in Sacramento and Sutter counties asking whether they would be willing to pay a higher assessment tax to finance municipal flood protection initiatives. Why is this important? In our Feb 1 posting we cited the list from the Army Corp of Engineers showing that 127 levees across the U.S. are at risk of failing. Well, of those 127, some 36 are located in the district of Sacramento – that’s nearly one third. If voted in, the assessment would raise $326 million over 30 years and help pay for $2.7 billion in flood improvements, including raising and strengthening levees on the Sacramento and American rivers.  The improvements  would bring the region up to 200-year flood protection.  Check out  further information from the I.I.I. on flood risk  and flood insurance, and also from the Insurance Information Network of California  (IINC).  Ã‚