Entries tagged with “Catastrophes”.


Winter storms caused $1.9 billion in insured losses in 2013, five times higher than the $38 million in damages seen in 2012, so it’s good to read via NOAA’s U.S. Winter Outlook that a repeat of last year’s winter of record cold and snow is unlikely.

In a release, NOAA’s Climate Prediction Center says:

Last year’s winter was exceptionally cold and snowy across most of the United States, east of the Rockies. A repeat of this extreme pattern is unlikely this year, although the Outlook does favor below-average temperatures in the south-central and southeastern states.”

While the South may experience a colder winter, the Outlook favors warmer-than-average temperatures in the western U.S., Alaska, Hawaii and New England, according to NOAA.

It’s important to note that for insurers, winter storms are historically very expensive and the third-largest cause of catastrophe losses, behind only hurricanes and tornadoes, according to the Insurance Information Institute (I.I.I.).

From 1994 to 2013, winter storms resulted in about $26.6 billion in insured losses, or $1.4 billion a year, on average, according to the Property Claim Services unit of ISO.

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Meanwhile, NOAA’s Winter Outlook also suggests that California’s record-setting drought will persist or intensify in large parts of the state this winter.

Mike Halpert, acting director of NOAA’s Climate Prediction Center, says:

Complete drought recovery in California this winter is highly unlikely. While we’re predicting at least a 2 in 3 chance that winter precipitation will be near or above normal throughout the state, with such widespread, extreme deficits, recovery will be slow.”

Natural catastrophe events in the United States accounted for three of the five most costly insured catastrophe losses in the first half of 2014, according to just-released Swiss Re sigma estimates.

In mid-May, a spate of severe storms and hail hit many parts of the U.S.  over a five-day period, generating insured losses of $2.6 billion. Harsh spring weather also triggered thunderstorms and tornadoes, some of which caused insured claims of $1.1 billion.

The Polar Vortex in the U.S. in January also led to a long period of heavy snowfall and very cold temperatures in the east and southern states such as Mississippi and Georgia, resulting in combined insured losses of $1.7 billion.

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These three events contributed $5.4 billion of the $19 billion in natural catastrophe-related insured losses covered by the global insurance industry in the first half of 2014, according to sigma estimates.

The $19 billion was 10 percent down from the $21 billion covered by insurers for natural catastrophe events in the first half of 2013. It was also below the average first-half year loss of the previous 10 years ($23 billion). Man-made disasters added $2 billion in insured losses in the first half of 2014, sigma reports.

The $21 billion in insured losses from disaster events in the first half of 2014 was 16 percent lower than the $25 billion generated in the first half of 2013, and lower than the average first-half year loss of the previous 10 years ($27 billion).

Total economic losses from natural catastrophes and man-made disasters reached $44 billion in the first half of 2014, according to sigma estimates.

More than 4,700 lives were lost as a result of natural catastrophes and man-made disasters in the first half of 2014.

One day after a magnitude 6.0 earthquake struck the San Francisco/Napa area of California, the Northern California Seismic System (NCSS) says there is a 29 percent probability of a strong and possibly damaging aftershock in the next seven days and a small chance (5 to 10 percent probability) of an earthquake of equal or larger magnitude.

The NCSS, operated by UC Berkeley and USGS, added that approximately 12 to 40 small aftershocks are expected in the same seven-day period and may be felt locally.

As a rule of thumb, a magnitude 6.0 quake may have aftershocks up to 10 to 20 miles away, the NCSS added.

According to Dr. Robert Hartwig, president of the Insurance Information Institute (I.I.I.), this earthquake is the strongest to impact the area since the 1989 Loma Prieta quake which resulted in $1.8 billion in insured claims (in 2013 dollars) being paid to policyholders.

Initial reports suggest the greatest damage has been to historic buildings in the city of Napa, with the downtown area cordoned off to fully assess damage. There have also been reports of non-structural damage such as items falling off shelves, including wine bottles and barrels, and substantial sprinkler leakage to many buildings.

The Napa region is most known for its wine industry, but tourism draws visitors to the area year-round.

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A report by catastrophe modelers CoreLogic EQECAT gave an initial estimate of $500 million to $1 billion in insured losses. Residential losses would account for about one half to one quarter of this loss estimate.

If the loss exceeds $1 billion it will be from uncertainty in commercial losses, CoreLogic EQECAT said, and losses to the wine industry could increase this estimate:

Business interruption (BI) losses are a major concern. As this is a very popular tourist area, many businesses – including wineries and restaurants – have sustained damage, both non-structural and structural.”

CoreLogic EQECAT noted that the Napa Valley wine harvest was already underway. Losses would have been less if this event had occurred pre-harvest.

According to the Napa Valley Vintners Association, while there have been reports of damage at some Napa Valley wineries and production and storage facilities, particularly those in the Napa and south Napa areas, vintners are still assessing their individual situations. More information is expected in the next 24 to 72 hours.

Standard homeowners, renters and business insurance policies do not cover damage from earthquakes. Coverage is available either in the form of an endorsement or as a separate policy.

I.I.I. earthquake facts and stats show California had the largest amount of earthquake premiums in 2013, at $1.6 billion, accounting for 61 percent of U.S. earthquake insurance premiums written.

This figure includes the state-run California Earthquake Authority, the largest provider of residential earthquake insurance in California. Only about 10 percent of California residents currently have earthquake coverage, down from about 30 percent in 1996, two years after the Northridge, California, earthquake.

The percentage of homeowners and renters who have earthquake insurance in the affected area is very low – in Napa less than 6 percent, and in Sonoma less than 10 percent, according to the California Earthquake Authority.

Check out key facts from the I.I.I. on the insurance industry’s contribution to the California economy here.

As we head into August and the weekend, here are some of the stories from around the insurance blogosphere that piqued our interest:

Bertha: Tropical storm warnings have been issued for Puerto Rico, the U.S. and British Virgin Islands and other nearby islands as Tropical Storm Bertha – the second named storm of the 2014 Atlantic hurricane season – approaches the Caribbean. Early Friday, the National Hurricane Center (NHC) reports that Bertha’s winds are near 45 mph with no significant change in strength expected in the next few days. The latest 5-day forecast track for Bertha via the NHC has it staying well off the U.S. East Coast – let’s hope it stays that way.

Commercial Rate Increases Slow: Prices for commercial property/casualty insurance continued to slide in the second quarter of 2014, according to the latest quarterly survey from the Council of Insurance Agents & Brokers. On average, prices for small, medium and large accounts eased by a modest -0.5 percent during the second quarter, compared with 1.5 percent in the first quarter. Competition continued to drive the market, the Council said. Of note, pricing for property fell into negative territory with a -2.6 percent drop last quarter compared with flat pricing in the first quarter.

CAT Bond, ILS Market Dashboard: Looking for real-time metrics of the growing insurance-linked securities (ILS) and catastrophe bond market? Look no further than the just-launched Artemis Dashboard, an easy-to-use tool that allows you to access the data behind the transactions. You can view the current size of the market, issuance for the current year, top sponsors in the market as well as analyze outstanding cat bond and ILS market by key metrics such as the mix of perils, triggers, expected loss levels and pricing, and also data about the development of the market over time.

The I.I.I. has additional resources on these topics. Check out I.I.I. facts + statistics on hurricanes and catastrophe bonds.

Multiple outbreaks of severe weather led to a costly month for insurers in the United States in May, as thunderstorm events continued to dominate the catastrophe record.

According to the latest Global Catastrophe Recap report by Aon Benfield’s Impact Forecasting, no fewer than four stretches of severe weather affected the U.S. during the month of May.

Aggregate insured losses exceeded $2.2 billion and overall economic losses were at least $3.5 billion, with large hail and damaging winds the primary driver of the thunderstorm-related costs, Impact Forecasting reports.

The costliest stretch occurred during a five-day period (May 18-23) which saw damage incurred in parts of the Midwest, Plains, Rockies, Mid-Atlantic and the Northeast, including the major metropolitan areas of Chicago, IL and Denver, CO.

According to Impact Forecasting’s report, baseball-sized hail and straight-line winds gusting in excess of 70 mph (110 kph) were recorded that severely affected residential, commercial and auto interests. Total economic losses were estimated at $2.5 billion, with insurers reporting losses minimally at $1.5 billion.

Meanwhile, the combination of excessive heat, extreme drought conditions, low relative humidity and gusty winds led to dozens of wildfires across parts of the Texas Panhandle and Southern California, leaving two dead.

Overall fire costs/damages from the two states approached $100 million, according to Impact Forecasting.

In Texas the most significant fire was in Hutchinson Country, where at least 225 homes and 143 unoccupied structures were damaged or destroyed.

In California, at least 14 fires were ignited in the greater San Diego metropolitan region, including the Poinsettia Fire that destroyed eight homes, an 18-unit condominium complex, and two commercial buildings.

The report adds that through the end of May, tornado activity in the U.S. remained in the bottom 25th percentile of all years dating to the early 1950s.

Check out I.I.I. facts and statistics on thunderstorms.

If you haven’t read it already, the April edition of the Global Catastrophe Recap Report by Aon Benfield’s Impact Forecasting puts some numbers around the thunderstorm events that devastated parts of the United States last month.

According to the report, severe weather and flash flooding that caused extensive damage across more than 20 states in April will likely be the first billion-dollar economic loss event of 2014 attributed to convective thunderstorms.

At least 39 people were killed and 250 injured amid nearly 70 confirmed tornado touch-downs, which occurred across more than 20 states in the Plains, Mississippi Valley, Southeast, Midwest, and Mid-Atlantic.

Economic losses are set to exceed $1 billion, with insured losses minimally in the hundreds of millions of dollars, Impact Forecasting reports.

Another U.S. severe weather outbreak in April led to major damage in parts of the Plains, Midwest and the Mississippi Valley. The most significant damage was due to hail, as hailstones the size of softballs struck the Denton, Texas metro region.

Total economic losses were estimated at $950 million, with insured losses in excess of $650 million, according to the report.

In a press release Adama Podlaha, head of Impact Forecasting, says:

The recent outbreaks of tornadoes, large hail and damaging straight-line winds in the United States have emphasized the importance of historical data analysis for insurers and reinsurers when trying to forecast future losses.”

If you’re wondering how many convective thunderstorm events made the list of significant natural catastrophes in 2013, take a look at this slide from a presentation made by I.I.I. president Dr. Robert Hartwig at the National Tornado Summit in February.

It shows that thunderstorms accounted for six of the nine significant natural catastrophe events with $1 billion economic loss and/or 50 fatalities in 2013.

A major severe weather outbreak continues across parts of the southern and eastern U.S. today, as insurers rush to multiple states hit Sunday and Monday by a total of more than 90 tornadoes, some of which caused fatalities.

Here are the NOAA Storm Prediction Center’s (SPC) storm reports for Sunday, April 27 and Monday, April 28:

A fact that often goes unreported is that tornadoes are among the largest causes of insured losses in any given year, accounting for 36 percent of all insured losses since 1983, according to the I.I.I.

Increasingly dense suburban development across the U.S. is putting more people and property in areas at risk of tornadoes than ever before.

Eighty percent of U.S. natural disaster related insurance claims payouts in 2013 were attributable to tornadoes and severe thunderstorms—$10.27 billion out of total estimate of $12.79 billion, according to remarks made in February 2014 by I.I.I. president Robert Hartwig, at the National Tornado Summit in Oklahoma City, Oklahoma.

We’re visiting the United Kingdom this week, so it’s appropriate we bring you a British themed news item.

An unpublished and original insurance claim for the loss of the Titanic will come under the hammer this Saturday at Aldridge’s auction house in Devizes, Wiltshire. The document is expected to fetch more than £12,000 ($20,185).

It’s more than 100 years since the RMS Titanic, a luxury British passenger liner, sank in the North Atlantic ocean on April 15, 1912 after colliding with an iceberg during her maiden voyage from Southampton, UK to New York City.

She carried 2,224 passengers and crew, but had lifeboats for only 1,178 people. More than 1,500 people died in the disaster.

The 4-page insurance document up for sale was prepared for insurance purposes and written by second officer Charles Lightoller, the most senior officer to survive the Titanic disaster. It was certified and signed by the Titanic’s second, third, fourth and fifth officers on April 19, 1912.

In what appears to be an attempt to avoid the insurers accusing the ship’s crew of negligence, the certified claim includes an interesting and sometimes curious account of the disaster:

The ship sank in very deep water and proved a total loss, with cargo, luggage, personal effects and mails.”

As to the actions on the bridge, the document states:

…the first officer immediately starboarded the helm reversed the engines full and closed all watertight doors. The ship swung to port, but struck a “growler” or small low-lying iceberg…”

In the words of the auctioneers, it’s fascinating that the officers would seem to attempt to minimize their encounter with the rather large and ominous iceberg by describing it as a “small low-lying iceberg.” This could possibly have been an attempt to downplay the size of the iceberg due to the question of liability and who was to blame for the sinking.

As the Western Daily Press reports, the strategy worked. Insurers paid out £3 million ($5.1 million) within 30 days – crucially before a major inquiry revealed the catalogue of mishaps that led to the sinking.

The lot is one of 200 Titanic collectables included in the auction, which is to commemorate the 102nd anniversary of the loss of the ship.

Atlantic Mutual, then the largest marine and general insurance firm in North America, was one of the major insurers of Titanic, providing the Oceanic Steam Navigation Co, Ltd (Titanic’s parent company) with what is believed to be more coverage for the ship than any of the many other single carriers which were part of Titanic’s insurance consortium.

Numerous Lloyd’s syndicates put their names on the insurance slip to cover the Titanic which was considered a prestigious risk to insure. More on how the disaster remains strongly linked to the history of the Lloyd’s market here.

The insurance policy was sold in an October 2013 auction.

Check out I.I.I. facts and statistics on marine accidents.

The second earthquake to strike the Los Angeles area on March 28 is a wake-up call and reminder of the risk to commercial and residential properties in Southern California, according to catastrophe modeling firm EQECAT.

(The M5.1 quake located 1 mile south of La Habre follows the M4.4 earthquake near Beverley Hills (30 miles to the northwest) on March 17.)

In its report on the latest quake, EQECAT notes that most homeowners do not carry earthquake insurance (only about 12 percent of Californians have earthquake coverage, according to I.I.I. stats), and those that do typically carry deductibles ranging from 10 percent to 15 percent of the replacement value of the home, and commercial insurance often carries large deductibles and strict limits on insurance coverage.

The remainder of the risk which is not insured is retained by property owners and frequently, their lenders. EQECAT reports:

CoreLogic regional studies have noted that a major earthquake in the Los Angeles Basin could easily produce damages to residential and commercial property exceeding $200 billion (Source: the EQECAT Insured Loss Database, 2013). The general lack of insurance coverage and high deductibles have led to concerns over the likelihood of widespread residential mortgage defaults arising from a large basin earthquake.”

This raises an important point.

Concerns have been raised before (here) about how the lack of mandatory earthquake insurance in California would result in high levels of mortgage defaults should a major earthquake occur, with widespread economic implications.

The post-quake scenario envisioned is one in which homeowners walk away from their damaged homes without repairing them, leaving many homes in foreclosure and forcing banks to bear the brunt of the loss in capital.

The potential knock-on effect for insurers and reinsurers? The loss of home ownership could severely diminish incoming capital on homeowner insurance policies.

According to an Aon Benfield report, the 1994 Northridge earthquake cost the mortgage industry up to $400 million in mortgage defaults due to foreclosure expenses, property repair costs, lost interest income, write-downs of existing loan balances and other administrative costs.

Check out an informative I.I.I. background paper on earthquake risk and insurance issues here.

Swiss Re’s final tally of 2013 global cat losses highlights the growing risk protection gap between economic losses and insured losses.

Total economic losses from natural catastrophes and man-made disasters amounted to $140 billion in 2013, of which almost one third – around $45 billion – were insured.

This means that in 2013 the global protection gap (the level of uninsured losses) was $95 billion.

Swiss Re notes:

Economic development, population growth, urbanization and a higher concentration of assets in exposed areas are increasing the economic cost of natural disasters. In addition, climate change is expected to increase weather-related losses in the future. All of the above, if not accompanied by a commensurate increase in insurance penetration, results in a widening protection gap.”

That’s not to say that there hasn’t been any progress over the years in the area of risk prevention and mitigation measures.

Swiss Re makes the point that a very effective pre-designed evacuation drive saved thousands of lives when Cyclone Phailin made landfall in Odisha, India in October 2013, with winds up to 260km per hour.

However, the cyclone destroyed around 100,000 homes and more than 1.3 million hectares of cropland.

Kurt Karl, chief economist at Swiss Re, says:

The total economic loss of Cyclone Phailin is estimated to be $4.5 billion, with just a tiny portion covered by insurance. The insurance industry can play a much larger role in helping societies deal with the fallout of disaster events, such as this and Typhoon Haiyan.”

Meanwhile, a post at Artemis blog suggests that sustaining local markets is the key to increasing insurance penetration and ultimately narrowing the gap between economic and insured losses:

In order to narrow this gap reinsurers and insurers need to work together with development organisations and the capital markets to create risk transfer facilities that truly meet the goal of growing insurance penetration. Sustaining local markets is key here. Initiatives which seek to create new capacity for a single, often reinsurer, backer just don’t seem to be having the desired effect so far and at the moment seem less likely to be sustainable over the longer-term.”

Here’s the Swiss Re chart showing the difference between total losses and insured losses from 1970 to 2013, highlighting the widening protection gap over the last 40 years:

Check out our prior post on the widening gap between economic and insured cat losses here.