Category Archives: Flood Insurance

CoreLogic: Insured Loss (including flood) approaches $10B

CoreLogic released new estimates for losses from Hurricane Harvey:

  • NFIP insured losses – between $6 billion and $9 billion. This implies losses will hit the private reinsurance layer ($4 billion excess $4 billion, of which reinsurers bear about 26 percent).
  • Private flood insurance losses: less than $0.5 billion.
  • Uninsured flood loss: between $18 billion and $27 billion.
  • Insured wind loss: $1 billion to $2 billion.

Insured loss for Texas and Louisiana is between $7.5 billon and $11.5 billion, according to their estimates. This excludes commercial, loss of business and other, broader economic losses, according to the CoreLogic press release.

An estimated 70 percent of flood damage from Hurricane Harvey is not covered by any insurance.

 

Hurricane Harvey loss estimates roundup as of 9/8/17

Media accounts after catastrophes discuss two types of losses – economic losses and insured losses. Sometimes they do not distinguish between the two. Insured losses are the claim dollars that insurance companies incur from a disaster. Economic losses are the total losses, some of which is covered by insurance and some of which is not. Another way to say it: insured loss + uninsured loss = economic loss.

A hurricane creates another complication. Hurricanes often involve flooding, but flood losses are not covered by a standard homeowners policy. They are covered by a special insurance policy with the federal National Flood Insurance Program. Often insured loss estimates leave out losses from flood insurance.

Here is a rundown of loss estimates, both insured and uninsured. We’ve tried to specify whether flood is included, or if there is another important nuance to the estimate.

We will keep updating estimates as we receive them.

 

Economic losses

  • 9/6: AIR estimates property losses from wind, flood and storm surge to be $65 billion to $75 billion. Insured losses will be about $13 billion, detailed in the “Insured Losses” section of this post.
  • Global risk modeling and analytics firm Risk Management Solutions (RMS) projects economic losses caused by wind, storm surge, and inland flood from the calamity to be as high as $70 billion to $90 billion. The majority of the overall loss is likely to be from inland flooding in the Houston metropolitan area, RMS said. Update 9/4: RMS puts the NFIP-insured tab at between $7 billion and $10 billion, implying a significant if not total loss to its private market reinsurers, who reinsured a little over $1 billion of the $4 billion excess $4 billion layer.
  • Update 9/1: Moody’s Analytics estimates economic losses to be between $81 billion and $108 billion, Artemis reported.
    • Homes: $45-55 billion
    • Commercial Property: $15-20 billion
    • Vehicles: $8-12 billion
    • Infrastructure: $5-10 billion
    • Total damages: $73-97 billion
    • Lost economic output: $8-11 billion
    • Total cost: $81-$108 billion
  • Moody’s Analytics estimates economic losses in southeast Texas alone to be between $51 billion and $75 billion, Artemis reported. Moody’s Analytics expects property damage to homes and vehicles of $30 billion to $40 billion, $10 billion to $15 billion in flood damages to businesses, $5 billion to $10 billion in infrastructure damage, and $6 billion to $10 billion of lost output.

Insured losses

  • AIR (9/6)
    • $10 billion to the insurance industry, of which $3 billion is wind and storm surge
    • This estimate excludes NFIP losses.
  • Morgan Stanley (9/1):
    • Wind – $2-4 billion
    • Auto – $3-6 billion
    • Commercial Flood – $5-15 billion
    • NFIP – $5-15 billion
  • Karen Clark (9/1):
    • Wind – $2.5 billion
    • Storm surge – $0.5 billion
    • Inland flood – $12.4 billion
  • Catastrophe modeling firm AIR Worldwide, A Verisk Analytics business, estimates that privately insured losses resulting from Hurricane Harvey’s winds and storm surge in Texas will range from $1.2 billion to $2.3 billion.
  • Business Insurance notes that S&P puts a $6 billion industry loss on the event, with primary companies, not reinsurers bearing the brunt. The article also discusses the possibility of flood vs. wind coverage disputes, which were a notable issue after Hurricane Katrina and superstorm Sandy.
  • RMS says industry wind losses will be in the “low billions” in its continually updated blog. Though it hit shore as a Category 4 storm, “Harvey is not primarily about wind.”
  • Update 8/31: CoreLogic estimates
    • NFIP insured losses – between $6 billion and $9 billion. This implies losses will hit the private reinsurance layer ($4 billion excess $4 billion, of which reinsurers bear about 26 percent).
    • Private flood insurance losses: less than $0.5 billion.
    • Uninsured flood loss: between $18 billion and $27 billion.
    • Insured wind loss: $1 billion to $2 billion.

    Insured loss for Texas and Louisiana is between $7.5 billion and $11.5 billion, according to their estimates. This excludes commercial, loss of business and other, broader economic losses, according to the CoreLogic press release.

  • Analytics firm Corelogic estimates privately insured losses from wind damage to range from $1.5 billion to $3 billion.

 

Working with Your Insurance Claims Professional

Insurance claims professionals often are the second people on the scene after a natural disaster, arriving right after the first responders. In fact, insurers are often considered the economic first responders – because it is insurance that fuels recovery.

After you call in your insurance claim, a claims adjuster will be assigned to you. This professional investigates and evaluates your loss and helps you get insurance funds to settle your claim. While some insurers may use a single adjuster, others may prefer to use certain specialists. That means you could have more than one claims adjuster assigned to assist with filing a claim after a disaster.

For example, you may have someone meet you at your property who is an expert in construction and structural damage. Another expert claims handler could be assigned to help itemize your home’s contents. If you have flood insurance, a flood claim specialist may be called in. And, if your vehicle was damaged by flooding, an auto damage specialist would be assigned.

In every instance, the goal is to pay your claim and provide the financial resources to rebuild. Understanding the insurance claims process will help to ensure that it is a smooth one.

What Does Flood Insurance Cover? What If You Lack Flood Insurance?

The human catastrophe of Hurricane Harvey continues to unfold. The financial challenges, unfortunately, have just begun.

Nationwide over 40 percent of homeowners think the standard homeowners policy covers flood damage from heavy rain, according to Insurance Information Institute public opinion surveys.

It doesn’t. It covers a hurricane’s wind damage, not its floods. This post outlines what a flood insurance policy covers and describes federal help if you lack flood insurance.

And the misconception – homeowners insurance covers flood – has a toll. Other I.I.I. surveys indicate that nationwide only 12 percent of homeowners have flood insurance.

In Harris County, Texas, 15 percent of homes are protected by flood insurance, according to data from the federal National Flood Insurance Program (NFIP) – which sells the overwhelming majority of residential flood policies. (A few private insurers also offer flood insurance.)

The standard NFIP policy covers . . . Continue reading What Does Flood Insurance Cover? What If You Lack Flood Insurance?

The Harvey Rumor: Once More Into the Breach . . .

For heaven’s sake, even Snopes.com is taking on the rumor that Harvey claims have to be filed by Friday:

Texas House Bill 1774 does indeed introduce changes to the way property damage insurance claims are dealt with in the state, but only in the event of a litigated dispute over a claim. Most insurance claims are settled out of court, and so the potential benefit in filing a claim before 1 September 2017 (which is itself marginal) will likely not apply in most cases.

The real benefit would be in filing a lawsuit before 1 September, but for obvious practical reasons, it is extremely unlikely that someone whose home has been destroyed or extensively damaged days earlier, would be in a position to do this.

The law was signed by Governor Greg Abbott on 26 May 2017.

Meanwhile, the National Flood Insurance Program, which will be handling the bulk of claims from Hurricane Harvey, makes these points:

  • Media reports warning of reduced liabilities for insurance companies, late payment penalties, and immediate timelines for filing claims do not pertain to NFIP claims.
  •  National Flood Insurance Policy (NFIP) claims are not subject to state laws. As such, the House Bill 1774 passed in Texas does not affect flood insurance policies or claims from the National Flood Insurance Program
  • NFIP policyholders who have experienced flood damage should file their insurance claims as soon as possible to begin their recovery process, but there is no benefit or penalty in filing before or after September 1, 2017.
  • Visit www.fema.gov/nfip to learn more about the National Flood Insurance Program and how to file your Flood Insurance claim.

Hurricane Harvey, 8/26 Evening Update

Weather Underground put it in boldface (scroll down a bit), so I think it is worth a pull-quote:

There is very little doubt that Texas is in for one of the worst rainfall and flood events in its history. The resulting rainfall is very likely to produce widespread, devastating, and potentially catastrophic flooding.

Most dire is the outlook for Houston, “given that city’s vast size and population and its well-known vulnerability to flooding.”

Good luck to all there and throughout Coastal Texas, and pardon the near-cliche, but don’t drive into water – most flood victims, I hear, are found in their vehicles.

To follow developments real-time, WU recommends:

Hurricane Harvey: 8/25 Evening Update

  • CoreLogic (via email blast) pegs insurance losses from Harvey between $1 billion and $2 billion. This excludes flood losses covered by National Flood Insurance Program (NFIP) and business interruption.
  • This increasingly looks like what Weather Underground calls a “colossal” flood event, with more than 20 inches of rain forecast over an area the size of Massachusetts, including Galveston and Houston. The more extreme models “break the map,” meaning there aren’t enough colors to portray visually the amount of rain forecast.
  • The rain plus the storm surge (4+ feet across the 200+ miles from Sargent to Port Mansfield, topping out at 12 feet [Sandy maxed out at 9 feet]) is likely to push flooding into Galveston Bay and Houston’s shipping canal.
  • The flooding is likely to test NFIP’s nascent private reinsurance program: 26 percent of losses in the $4 billion excess $4 billion later. (I blogged about the structure here.)
  • Remember that the standard homeowners’ policy doesn’t cover flooding – you have to have flood insurance from NFIP or a private policy that specifically covers flood.
  • If you are there, follow the advice from I.I.I. CEO Sean Kevelighan in our press release and “listen to local authorities, while also doing what is needed to prepare, such as reinforcing windows with shutters and taking a home inventory, if time permits. If you have to evacuate, bring your financial documents, including your insurance policy, so you can start the claims process once the storm has passed.
    “Keep in mind, the more prepared you are, the greater the potential to be more resilient and withstand damage.”
  • I would just add that if you have the time, photograph areas likely to flood as evidence for a subsequent claim. Be sure to photograph drapes and carpets, which people seem to forget but can be surprisingly expensive to replace.

Back-To-School flood safety

From Buzzfeed, a back-to-school headline you may not have considered: Is Your School In A Flood Zone?

For example, a Salt Lake City rainstorm just caused a flash flood that damaged many properties, including East High School where Disney’s High School Musical was filmed.

According to a report from the Pew Charitable Trusts and consulting firm ICF, some 6,444 public schools across the United States that serve nearly 4 million students are located in the 100 counties with the highest composite flood scores.

The risk of school flooding is distributed widely across the U.S. Schools in both inland and coastal areas have the highest composite flood risk scores, the report says.

Think Atlantic Coast, Gulf Coast, Mississippi River corridor, and southwestern Arizona.

Even when a school is not located in a flood zone, students who attend it often live within areas of flood risk.

“Of more than 5,000 schools, half or more of the ZIP code is located in a designated 1 percent annual chance flood zone.”

Here’s the map:

The composite flood risk score calculated by ICF is based on three indicators: a school’s location within a designated flood zone, the percentage of a school’s neighborhood (as represented by ZIP code) located within a flood zone, and the number of historical flood-related federal disaster declarations in that county.

Taking proactive steps to reduce risks and improve flood safety is a growing priority for some schools.

Insurance Information Institute facts and statistics on flood insurance here.

Private market flood insurance is cheaper in many cases

Alongside the National Flood Insurance Program (NFIP), a thriving private flood insurance market would provide wider and in many cases cheaper coverage options, according to a new study.

Consulting firm Milliman, in partnership with risk modeler KatRisk, looked at three states – Florida, Texas, and Louisiana – which combined account for 56 percent of NFIP insurance policies in-force nationwide.

Its analysis compared modeled private flood insurance premiums to those of the NFIP.

Key findings:

  • Some 77 percent of single-family homes in Florida, 69 percent in Louisiana, and 92 percent in Texas could see cheaper premiums with private insurance than with the NFIP.
  • Of the homes modeled, 44 percent in Florida, 42 percent in Louisiana and 70 percent in Texas, could see premiums that are less than one-fifth that of the NFIP.
  • Conversely, private insurance would cost over twice the NFIP premiums for 14 percent of single-family homes in Florida, 21 percent in Louisiana and 5 percent in Texas.

prior post discussed how private carriers are dipping their toes in the flood insurance market.