The Week in a Minute, 11/3/17

The III’s Michael Barry briefs our membership every week on key insurance related stories. Here are some highlights:

  • Eight people were killed in lower Manhattan, and scores were injured, when a 29-year-old man drove a van down a bicycle path in what is now widely considered a terrorist attack.
  • FEMA is still paying for more than 60,000-plus Texans to live in hotels in the aftermath of Hurricane Harvey, which made landfall on Aug. 25, according to The Wall Street Journal.
  • Florida’s Office of Insurance Regulation says insured claim payouts arising out of Hurricane Irma statewide now stand at $5.3 billion.

Business Insurance Coverage: Terrorism Insurance

On Tuesday, October 31, a man plowed a pickup truck into a crowded bike path in lower Manhattan. Eight people were killed and 11 more injured. A note found near the truck indicate the driver’s affiliation with the Islamic State, but no evidence of a wider plot or direct ties between the driver and ISIS has been found, and the incident is another in a growing list of “inspired” attacks, according to counterterrorism experts.

Although New York City mayor Bill de Blasio and other politicians have called the attack an act of terror, policyholders with terrorism insurance are only covered by that policy if the U.S. Department of the Treasury officially certifies an event as an act of terrorism. This requires that the act be violent and driven by the desire of an individual or individuals to coerce U.S. civilians or government. The act must also cause over $5 million in property and casualty losses.

Since the attacks on September 11, none of the attacks on the U.S., including the Boston Marathon bombing, have been certified as terrorist acts by the Treasury. In the absence of that certification, business owners can file claims under their standard property casualty policies.

Small business and cyber insurance

Risk management services are an important way cyber insurance adds value for small businesses, according to a new I.I.I. paper.

In Protecting Against #Cyberfail: Small Business and Cyber Insurance, I.I.I. co-authors James Lynch and Claire Wilkinson say:

“The provision of these types of services is considered a growth area in the cyber market for SMBs, where price may be a barrier to insurance coverage in the first place. For larger companies, cyber-related risk management services may be offered at a discount or for free.

“For SMBs in particular, offering a risk management or training solution where they can learn more and keep themselves up-to-date on current threats is perhaps most valuable.”

Also heard at the Advisen Cyber Risk Insights Conference in NYC last week: part of the value proposition for SMBs is that cyber policies offer solutions, not just coverage.

Andy Lea, vice president underwriting for E&O, Cyber and Media, CNA, told the conference: “The value proposition is more prominent with SME and middle market companies that just don’t have resources available in-house to manage risks. This is an opportunity for brokers and carriers to add value.”

The challenges to building better after a disaster

The pressures to rebuild quickly after a disaster can pose a challenge to the notion that immediately after a disaster is the perfect opportunity for creating more disaster resilient buildings and infrastructure.

The author of this blog, Robert Muir-Wood, chief research officer for RMS, cites several recent examples – “Whether this is to elevate buildings out of the flood zone in Houston or raising wind design code standards in Dominica, the political instinct will be to remove any barrier in the path of rapid reconstruction.”

He concludes that we should try harder to argue for making the transformation at the time of the disaster and not give in to the political arguments where economic recovery is the number one priority.

 

The week in a minute, 10/26/17

The III’s Michael Barry briefs our membership every week on key insurance related stories. Here are some highlights:

  • Hurricane Nate caused insured wind-caused damage totaling anywhere from less than $500 million (Risk Management Solutions) to as much as $1 billion (CoreLogic). Nate made landfall as a Category 1 storm on the Louisiana-Mississippi border on the weekend of October 7-8.

 

Superstorm Sandy

By Phil Klotzbach, lead author of the Colorado State University (CSU) hurricane forecasting team, and I.I.I. non-resident scholar.

Five years ago this month (October 29), Superstorm (hurricane until a few hours before landfall) Sandy made landfall along the coast of New Jersey just northeast of Atlantic City.  Sandy was one of the most devastating hurricanes to hit the northeast United States, causing more than 70 fatalities and $50 billion dollars in damage. It was the deadliest Northeast United States hurricane since Agnes (1972) and the 2nd most expensive United States hurricane on record behind Katrina (2005).  While heavy rainfall and strong winds were part of Sandy’s legacy, the primary cause of the massive destruction and damage that occurred was due to high storm surge levels.

Sandy developed in the SW Caribbean on October 22 (Figure 1). This region is a typical hotbed for October Atlantic hurricanes.  The system slowly intensified, eventually reaching hurricane strength before hitting Jamaica as a Category 1 hurricane.  It briefly reached major hurricane strength (Category 3+ on the Saffir-Simpson Wind Scale) before making landfall in Cuba.

Figure 1: Track of Hurricane Sandy from its formation in the SW Caribbean until its dissipation in the northeast United States.  Figure courtesy of National Hurricane Center.

Landfall in Cuba weakened Sandy somewhat, and the system began to undergo structural changes as it interacted with a large upper-level low pressure area.  This upper-level low caused the inner core to lose intensity, but it also caused the storm to grow considerably in size.  Sandy weakened to a tropical storm, but then vertical wind shear (the change in wind direction with height in the atmosphere), began to abate and Sandy was able to re-intensify to hurricane strength.  The storm, however, retained its large, sprawling circulation. (Figure 2).  Tropical storm-force winds extended more than 900 miles away from the center of the circulation as it approached the United States coast, making it the largest Atlantic hurricane on record (since 1988).

Figure 2: Infrared satellite imagery of Hurricane Sandy on October 29 showing the large, sprawling nature of its circulation.  Figure courtesy of NOAA.

A large blocking high to the north of Sandy caused the storm to track to the northwest (Figure 3).  Once Sandy had finished transiting the warm waters of the Gulf Stream and moved over cooler shelf waters near the New Jersey coast, it completed its transition into a post-tropical cyclone several hours before landfall.

Figure 3: Mid-level weather pattern causing the anomalous track that Hurricane Sandy took.  Strong high pressure to the north of Sandy prevented recurvature and caused Sandy to track towards the northwest.  Figure courtesy of National Hurricane Center.

While the maximum intensity at the time of its New Jersey landfall was 80 mph – equivalent to a Category 1 hurricane – the storm’s large size triggered huge amounts of storm surge.  In addition, tides were running higher than normal, due to the lunar cycle; storm tide values shattered records in parts of New York City.  At the Battery, Manhattan’s southernmost tip, the storm tide exceeded 14 feet, which was more than four feet higher than the previous record set during a winter storm in December 1992.   Many other areas along the coast of New Jersey and in New York City reported storm surge levels of 5-8 feet from Sandy which combined with astronomical factors to cause massive inundation.

Sandy’s transition from hurricane to post-tropical cyclone immediately prior to landfall as well as the massive size of the system has helped us to refocus efforts in the five years since the storm to clearly delineate between the Saffir-Simpson Wind Scale category and potential impacts that the storm may generate. Just because a system transitions from a hurricane into a post-tropical system does not mean that its impacts have been ameliorated. While it has now been five years since Sandy’s landfall, it will forever be remembered in the northeast United States as an incredibly damaging storm.

Cleanup from the North Bay Fire Storm

The State of California launched the largest wildfire cleanup in the Golden State’s history on Monday, October 23rd, following the unprecedented North Bay Fire Storm.  I.I.I.’s California representative Janet Ruiz attended a press conference hosted on Monday by the City of Santa Rosa where government representatives answered questions about debris removal. Here are a few of the questions and answers:

Q: Who is in charge of the cleanup?

A: The clean-up will be done under unified command with California Office of Emergency Services (Cal OES), FEMA, the Environmental Protection Agency and the U. S. Army Corps of Engineers.

Q: What is the timeline?

A: This command structure is expected to expedite the removal of fire debris in Sonoma County, with a deadline of completion anticipated to be early 2018.

Q: What is the first priority?

A: The first phase of the cleanup will be household hazardous waste and debris including propane tanks, burned out vehicles, air conditioners and refrigerators.

Q: Will homeowners have to pay for the cleanup?

A: Cal OES will accept insurance debris removal payouts as full payment. Removal will be free to homeowners who don’t have insurance.

Q: Are homeowners required to participate?

A: Homeowners can opt out of this program and hire their own licensed contractor to do their debris removal if they prefer.

For more information on the recovery efforts visit sonomacountyrecovers.

Northern California Wildfires: Filing a Claim

Now that the recovery process from Northern California’s deadly wildfires is under way, the largest debris-removal campaign in California’s history is in progress. Thousands of insurance claims are pouring in and the state insurance department has issued and expedited claims handling notice for all property/casualty companies.

The Insurance Information Institute has the following resources related to the claims process:

The Insurance Institute for Home Safety (IIHS) also has a series of wildfire related publications.

And to be sure you are prepared in case of wildfire, I.I.I has this article: Preparing an Effective Evacuation Plan.

 

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