Entries tagged with “Catastrophes”.
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Earthquake resilience was in the spotlight as the Obama administration gave its support for an earthquake-alert system on the West Coast at a White House summit Tuesday.
President Obama also signed an executive order establishing a federal earthquake risk management standard which will improve the capability of federal buildings to function after a quake.
The order requires federal agencies to ensure that federal buildings are constructed or altered using earthquake-resistant design provisions in the most current building codes.
A 2015 scientific assessment from the U.S. Geological Survey shows that more than 143 million Americans could experience potentially damaging earthquakes, nearly double the prior 2006 estimate.
The ShakeAlert early warning system being developed and tested in the West would warn residents and businesses from at least a few seconds to a few minutes before the shaking starts.
This would be enough time to slow and stop trains and taxiing planes, and to prevent cars from entering bridges and tunnels, for example.
A common misperception among Americans is that earthquake coverage is provided in a homeowners or business insurance policy.
However, standard homeowners, renters and business insurance policies do not cover earthquake damage. Coverage is available either in the form of an endorsement or as a separate policy.
Residential earthquake insurance in California is sold through the California Earthquake Authority, a privately funded, publicly managed organization.
Some 85 percent of U.S. homeowners said they do not have coverage for earthquake damage in response to the Insurance Information Institute’s (I.I.I.) annual Pulse Survey.
The I.I.I. Pulse results showed significant variations in the number of consumers that have earthquake insurance across the U.S.
That number was greatest in the earthquake- prone West, where 18 percent of homeowners said they had purchased separate earthquake insurance coverage.
Information on reducing earthquake damage to homes and businesses is available on the Insurance Institute for Business and Home Safety (IBHS) website.
The I.I.I. also offers facts and statistics on earthquakes and tsunamis here.
Five of the seven individual billion-dollar insured loss natural disaster events in 2015 were recorded in the United States, according to Aon Benfield’s Annual Global Climate and Catastrophe Report.
The other two billion dollar events were recorded in Europe.
All of the events were weather-related and below the average of eight. The five events in the U.S. were equal to the 2000-2014 average.
Italy’s May 2012 earthquake was the last non-weather billion-dollar insured loss event.
The all-time record of 17 billion-dollar weather events was set in 2011.
The costliest individual insured loss event of the year was a prolonged stretch of heavy snow, freezing rain, ice, and frigid cold that impacted much of the eastern United States in February 2015. That event prompted an estimated $2.1 billion insured loss.
Other billion-dollar insured loss events in the U.S. included a severe thunderstorm outbreak in the U.S. in May and severe thunderstorms and flooding in December. Each of these events cost an estimated $1.4 billion in insured losses.
Another thunderstorm event in the U.S. in April cost $1.2 billion, while the yearlong drought in the West was another $1 billion insured loss event.
The two non-U.S. billion dollar insured loss events of 2015 consisted of the catastrophic December flooding in the UK that cost an estimated $1.3 billion, and European windstorms Mike and Niklas in March and April which resulted in an estimated insured loss of $1 billion.
Aon Benfield noted that on a global scale disasters caused insured losses of $35 billion in 2015, below the 15-year mean of $51 billion and 14 percent lower than the median ($40 billion).
This was the fourth consecutive year with declining catastrophe losses since the record-setting year in 2011.
The U.S. accounted for 60 percent of global insured disaster losses in 2015, reflecting the high rate of insurance penetration in the country, according to the report.
I.I.I. facts and statistics on U.S. catastrophes are available here.
Wildfires in 2015 have already caused more damage and financial loss in the United States than in any other year since 2007.
Aon Benfield’s latest Global Catastrophe Recap report reveals that California wildfires during September destroyed more than 2,000 homes and resulted in estimated insured losses of at least $1.1 billion—the costliest since 2007.
The Valley Fire, northwest of San Francisco, and the Butte Fire, southeast of Sacramento, were the most destructive of the fires.
In its report, Aon notes that the Valley Fire left four people dead, destroyed 1,958 residential and commercial structures and damaged 93 others. It is the third-most damaging wildfire in state history.
Total economic losses were estimated beyond $1.5 billion, while preliminary insured losses were put at in excess of $925 million, Aon reports.
The Butte Fire left two people dead and destroyed 475 homes, 343 outbuildings and damaged 45 other structures. It is the seventh most damaging wildfire in state history.
Total economic losses were estimated at $450 million while preliminary estimated insured losses are in excess of $225 million.
With the peak of California wildfire season just beginning, the severity of the September events serves as a reminder of how costly the peril can be for the insurance industry, Aon Benfield said.
Elsewhere around the world, wildfires continued to pose problems in parts of Indonesia as officials declared 2015 the worst year for wildfires since 1997.
One study reported that Indonesia would endure $4 billion in direct and secondary economic losses from the fires in the regions of Sumatra and Kalimantan, Aon said.
The Insurance Information Institute (I.I.I.) provides some useful facts and statistics on wildfires here.
A recent I.I.I. media advisory notes that seven of the 10 costliest wildfires in U.S. history in terms of insured losses have occurred in California. The costliest of these was the 1991 Oakland fire which produced $2.7 billion in claims (in 2014 dollars).
For more on the California wildfires, Janet Ruiz, I.I.I.’s Northern California-based representative can be reached at firstname.lastname@example.org or (707) 490-9375.
Wednesday, September 16, 2015
Posted by Claire under Catastrophes, Wildfires
A report in USA Today throws the spotlight on just how many homes in California are vulnerable to wildfire.
Data from the U.S. Forest Service cited by USA Today reveals that one-third of homes in California are located in areas prone to wildfires.
Apparently the Forest Service’s report estimates that 4.5 million homes in California are located in areas designated as the Wildland-Urban Interface (WUI)–developments and communities adjacent to forests.
USA Today goes on to note that California wildfires have destroyed more than 750 houses and hundreds of other buildings in the past week based on figures from CalFire, the state’s firefighting agency.
The Valley fire near Sacramento has been one of the most destructive. Mark C. Bove, senior research meteorologist with Munich Re America tweeted that for Northern California the Valley Fire is likely the biggest wildfire event in terms of insured loss since the Oakland firestorm of 1991.
GCCapitalIdeas.com has a timely roundup of the impact of the Valley and Butte fires here. Another useful resource is I.I.I.’s issues update on wildfires.
In a media advisory the Insurance Information Institute (I.I.I.) notes that seven of the 10 costliest wildfires in U.S. history in terms of insured losses have occurred in California. The costliest of these was the 1991 Oakland fire which produced $2.7 billion in claims (in 2014 dollars).
Over the 20-year period 1995 to 2014, fires—including wildfires—accounted for 1.5 percent of insured catastrophe losses, totaling about $6.0 billion, according to the Property Claims Services (PCS) unit of ISO.
Janet Ruiz, I.I.I.’s Northern California-based representative, is available to conduct interviews in person or via Skype. She can be reached at email@example.com or (707) 490-9375.
The Insurance Institute for Business & Home Safety (IBHS) offers tips on how to protect your property from wildfire here.
A 2015 study by CoreLogic identifies almost 900,000 residential properties across 13 states in the western U.S. —representing an estimated combined total property value of more than $237 billion—at high or very high risk of wildfire damage.
Tuesday, September 8, 2015
Posted by Claire under Catastrophes, Insurers and the Economy
The explosions at the Port of Tianjin, China are set to become one of the largest insured manmade losses in Asia to-date with potential losses of up to $3.3 billion, according to a new report by Guy Carpenter.
The event, which blasted shipping containers, incinerated vehicles in the port and on an adjacent highway overpass, destroyed warehouses, production facilities and dormitories, and impacted a nearby railway station and residential structures, will also be considered one of the most complex insurance and reinsurance losses in recent history.
Many classes of insurance were impacted by the loss, including: containers; cargo in containers; property; auto; and general aviation.
While access to the site is limited, Guy Carpenter said its satellite-based catastrophe evaluation service known as CAT-VIEW was able to utilize high resolution pre- and post-event satellite imagery to understand what exposures were present at the time of the blast and therefore could contribute to the loss.
The findings come as a new study published by Lloyd’s says that manmade risks are having an increasingly significant impact on economic output at risk (GDP).
In its analysis, Lloyd’s City Risk Index finds a total of $4.6 trillion of projected GDP is at risk from 18 manmade and natural disasters in 301 major cities around the world—out of a total projected GDP between 2015 and 2025 of $373 trillion.
However, manmade threats such as market crash, power outages and nuclear accidents are associated with almost half the total GDP at risk.
A market crash is the greatest economic vulnerability—representing nearly one quarter ($1.05 trillion) of all cities’ potential losses, Lloyd’s says.
New and emerging threats such as cyber attack, human pandemic, plant epidemic and solar storm are also having a growing impact, representing more than one fifth of total GDP at risk, Lloyd’s reports.
Governments, businesses and insurers must work together to ensure that this exposure—and the potential for losses—is reduced, according to Lloyd’s CEO Inga Beale.
Lloyd’s research shows that a 1 percent rise in insurance penetration translates into a 13 percent reduction in uninsured losses—a 22 percent reduction in taxpayers’ contribution following a disaster.
Insurance also improves the sustainability of an economy and leads to greater rates of growth. A 1 percent rise in insurance penetration leads to increased investment equivalent to 2 percent of national GDP, Lloyd’s notes.
Check out the I.I.I. publication A Firm Foundation: How Insurance Supports the Economy.
Friday, August 21, 2015
Posted by Claire under Catastrophes, Disaster Preparedness, Hurricanes
The Insurance Information Institute (I.I.I.) is looking back at the costliest hurricane in U.S. history that took 1,800 lives and cost $125 billion in total economic losses, via a comprehensive infographic.
Insurance claims by coverage and state, total National Flood Insurance Program losses from Katrina, and other sources of Katrina recovery funds are all detailed.
Another compelling section to the infographic asks where are we now?
One of the fascinating analogies it draws is that even as awareness of flooding due to coastal storms rises, so too does the population of coastal communities.
As the I.I.I. notes, the 10 year anniversary of Hurricane Katrina gives us a timely opportunity to look at the nation’s preparedness for megadisasters.
I.I.I. disaster preparedness experts will be available via satellite media tour on Thursday August 27 to discuss how individuals and small business owners can better prepare.
View the infographic below to see Hurricane Katrina by the numbers:
Wednesday, August 19, 2015
Posted by Claire under Catastrophes, Hurricanes
I was in New Orleans last week speaking at a Louisiana Department of Insurance conference marking the 10th anniversary of Hurricanes Katrina and Rita, writes Insurance Information Institute (I.I.I.) chief actuary James Lynch.
State Insurance Commissioner Jim Donelon (pictured below) organized the conference to emphasize how the state’s property insurance market “is more competitive and more viable than it was the day before Hurricane Katrina.” The state sought private market solutions to keep the marketplace vibrant in the wake of more than $25 billion in insured losses.
Louisiana adopted a statewide building code so structures would be better able to withstand a hurricane. It abolished its politically appointed Insurance Rating Commission, which made it easier for insurers to charge fair premiums. And the state carefully winnowed customers out of its insurer of last resort, Louisiana Citizens Property Insurance Corp. Citizens’ market share soared after the 2005 hurricane season, approaching 10 percent by 2008. By 2014, its market share had fallen to 1.8 percent.
I spoke on a panel about the state’s property insurance markets operate today. I tried to emphasize how Louisiana’s experience shows the importance of adequate insurance. We also talked about alternative capital and how it is shaping the pricing of catastrophe reinsurance, a topic I.I.I. has discussed here.
Over the next few weeks, you will be seeing a lot of media coverage of the 10th anniversary of Hurricane Katrina. Here are some notable links:
- The New Orleans Times-Picayune won a Pulitzer Prize for its coverage. The paper recaps that work and adds an up-to-date perspective here (h/t to I.I.I.’s Diane Portantiere for the link).
- NPR is pouring out audio reports this month on Hurricane Katrina: 10 Years of Recovery and Reflection.
- Forbes contributor Marshall Shepherd talked to meteorologists who noted how forecasting has improved in the past 10 years. Lots of interesting insights, including Colorado State University hurricane expert Phil Klotzbach, who sadly notes that a well-forecast hurricane like Katrina still resulted in more than 1,500 deaths. Klotzbach wondered how many survivors of Category 5 Hurricane Camille in 1969 reasoned that Cat 3 Katrina “would be a piece of cake.” I can confirm that Mississippi Governor Haley Barbour, in his tick-tock memoir about the storm and its aftermath, constantly referred back to his Camille experience – until he saw Katrina’s devastation. Tragically, the breadth and height of Katrina’s storm surge were unprecedented.
- Barbour’s was one of many books published to coincide with the anniversary. The New York Times Book Review on August 7 featured New Orleans works, including a review of “Katrina: After the Flood,” about the city’s recovery, and a roundup of works examining the tragedy from racial, social and cultural perspectives.
- Business Insurance discusses how catastrophe models have improved in the past 10 years, particularly in the quality of the input the models receive:
- For example, casino barges moored on the Mississippi Gulf coast, badly damaged in Katrina’s storm surge, often were wrongly classified as normal buildings, said Jayanta Guin, executive vice president at Boston-based catastrophe modeler AIR Worldwide. Now, modelers have better data on the construction characteristics, occupancy, height and other aspects of individual buildings, he said.
- Global Insurer Allianz used the anniversary to draw on its own database of major business insurance claims worldwide to examine trends in catastrophe losses, particularly (but not exclusively) marine losses. Its report, released August 18, points to these lessons learned:
- Storm surge can cause more damage than high winds. Storm surge has been a contributing factor in half of the costliest U.S. storms.
- Levees in the United States need improvement, even after the rebuilding of New Orleans’ levees after Katrina.
- Most wind damage occurred “to the building envelope” – roof, walls, windows.
- Demand surge can not only affect the price of materials and workers, post storm, it can affect the quality of materials, as we famously saw with drywall that created a new set of issues.
Tuesday, August 11, 2015
Posted by Claire under Catastrophes, Insurers and the Economy
While total economic losses from natural catastrophes and man-made disaster events remain far below-average in the first half of 2015, the global insurance and reinsurance industry is covering a higher than average percentage of those losses.
That’s the key takeaway from preliminary sigma estimates of global catastrophe losses for the first half of 2015, just released by Swiss Re.
Of the $37 billion in total economic losses from disaster events in the first half of 2015, the global insurance and reinsurance industry covered nearly 45 percent, or $16.5 billion, of these losses.
This is higher than the previous 10-year average of 27 percent covered by the global re/insurance industry.
Of the overall insured losses in the first half of 2015, $12.9 billion came from natural disasters, down from nearly $20 billion in first half 2014, and again below the average first-half year loss of the previous 10 years ($25 billion).
Man-made disasters triggered an additional $3.6 billion in insured losses in the first half of 2015, sigma said.
So why did insurance and reinsurance cover a higher proportion of global catastrophe losses in the first half?
The answer lies in the location of the most costly insured natural catastrophes losses for the insurance industry in the first half of 2015—thunderstorms in the United States and winter storm losses in Europe.
These larger loss events, as well as the severe winter weather in North America, all contributed to the lower percentage of uninsured losses through the first half of the year.
Here’s the Swiss Re chart showing the dollar breakout of insured and uninsured catastrophe-related losses from 2005 through 2015:
Note: insured losses + uninsured losses= total economic losses
But, as Artemis blog reports here, sadly the lower proportion of uninsured losses is not related to any major increase in insurance penetration.
The Nepal earthquakes provide a striking example. While economic losses from the quakes are estimated at $5 billion, only around $160 million were insured.
In the words of Kurt Karl, chief economist at Swiss Re:
The tragic events in Nepal are a reminder of the utility of insurance. Insurance cover does not lessen the emotional trauma that natural catastrophes inflict, but it can help people better manage the financial fallout from disasters so they can start to rebuild their lives.”
Check out Insurance Information Institute (I.I.I.) facts and statistics on global catastrophes.
Tuesday, July 21, 2015
Posted by Claire under Catastrophes, Insurers and the Economy
Despite a rather quiet first half of 2015 for global catastrophes, insurers endured at least five separate billion-dollar insured loss events (all weather-related), according to Aon Benfield’s just-released Global Catastrophe Recap: First Half of 2015.
None of the events crossed the multi-billion dollar loss threshold ($2 billion or greater) and four of the five were recorded in the United States, Aon Benfield said.
The costliest event for the insurance industry was an extended period of snow and frigid temperatures in the U.S. during February ($1.8 billion in insured losses). (See our earlier post on first half winter storm losses here).
Other billion-dollar insured loss events in the U.S. included an early April severe thunderstorm outbreak ($1 billion), a severe thunderstorm and flash flood event at the end of May ($1.2 billion), and projected losses arising from the ongoing drought across the West ($1 billion and counting).
The sole billion-dollar insured loss event to be recorded outside the U.S. during the first half of 2015 was Windstorms Mike and Niklas in Western and Central Europe at the end of March/early April. Niklas became the first billion-dollar insured loss windstorm event in Europe since Xaver in December 2013, Aon Benfield said.
Note: the loss totals, which include those sustained by public and private insurance entities, are preliminary and subject to change.
If you’re wondering about the difference between economic and insured loss totals, the 7.8 magnitude earthquake that hit Nepal on April 25 (and subsequent aftershocks) is a good example.
From an economic loss standpoint, the Nepal earthquake ranks as the costliest global natural disaster during the first half of 2015, Aon Benfield reports.
Total damage and reconstruction costs throughout the impacted areas were estimated as high as $10 billion (subject to change), with reconstruction costs in Nepal alone put at nearly $7 billion.
Despite having a multi-billion-dollar economic cost to Nepal with overall economic effects poised to equal more than one-third of the country’s entire GDP, only a very small fraction of those losses – about 2 percent – was covered by insurance.
Check out Insurance Information Institute (I.I.I.) facts and statistics on global catastrophes here.
Tuesday, July 14, 2015
Posted by Claire under Catastrophes, Winter Storms
As my kids head off for their snowy-themed day at camp, the statistic that jumps off the page in the 2015 Half-Year Natural Catastrophe Review jointly presented by Munich Re and the Insurance Information Institute (I.I.I.) is the record $2.9 billion (and counting) in aggregate insured losses caused by the second winter of brutal cold across the Northeastern United States.
As Munich Re illustrates in the following slide, a total of 11 winter storm and cold wave events resulted in 80 fatalities and caused an estimated $3.8 billion in overall economic losses in the period from January 2015 to the end of winter:
But the $2.9 billion in insured losses goes higher still when you factor in 2014’s contribution to winter storm losses.
As Munich Re America notes in a press release, if the harsh U.S. winter of 2014/15 is taken as a whole, then the insured losses rise to $3.2 billion and overall economic losses to $4.3 billion.
And this figure does not include indirect losses due to delayed flights, power failures and business interruptions.
As Tony Kuczinski, president and CEO of Munich Re America, says:
The fact that, once again, tens of thousands of people were temporarily left without electricity shows that the U.S. simply must invest in stronger, more weather resilient, infrastructure.”
And when you consider that losses from snow, ice, freezing and related causes typically cost insurers between $1 billion and $2 billion annually, as noted by Dr. Robert Hartwig, I.I.I. president, the impact of the exceptionally cold winter of 2014/15 really starts to bite.