Tag Archives: Drought

Satellite, Mobile Technologies Underpin Insurance Payout To Herders In Kenya

A $2 million insurance payout to thousands of livestock owners in Kenya hit by drought is a good example of insurance and technology coming together to deliver financial protection where it is needed most.

The Kenya Livestock Insurance Program (KLIP), a public-private partnership developed by the government of Kenya and reinsured by Swiss Re, just announced the payout which averages around $170 per household and will be made by the end of February.

KLIP uses satellite technology to measure vegetation available to livestock. Payment is triggered for feed, veterinary medicines and water trucks when the satellite data shows drought is so bad that animal lives are at risk.

In this case, the $2 million payout will help save 70,000 tropical livestock – primarily cows, goats and camels – that in turn sustain approximately 100,000 people across six counties.

Even better, a consortium of insurers led by APA Insurance will pay funds directly into the livestock owners’ bank accounts or via mobile phone accounts.

Here’s the infographic:

The 2016/2017 drought in Kenya was one of the worst in 16 years. Between 2008 and 2011, livestock losses in Kenya accounted for 70 percent of the $12.1 billion in damages caused by drought.

More on this story from Thomson Reuters Foundation.

Insurance Information Institute facts and statistics on droughts and heatwaves are available here.

Heat Hazard

We’re reading a lot about the dangers of heat waves and drought.

Aon Benfield’s latest  Global Catastrophe Recap report highlights the exceptional heat wave that impacted India from May 21-31, killing at least 2,500.

This is one of the highest death tolls on record for heat-related casualties, Aon notes.

The states of Andhra Pradesh, Telangana, and Odisha (Orissa) were worst affected by temperatures that reached 48.0ËšC (118ËšF) in several areas. Temperatures were so hot that roads literally melted in some areas.

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An opinion piece in the New York Times over the weekend spoke more to the deadly risks of heat and humidity.

Closer to home the ongoing severe drought conditions across much of the Western United States, with a particular emphasis on California, continue to exact an economic toll.

Aon cites a study conducted by the UC Davis Center for Watershed Sciences on behalf of the California state government that concluded that total 2015 statewide economic losses from the drought will top $2.7 billion.

Including damage from neighboring states, the overall total loss will rise to at least $3 billion.

Heat waves and drought can cause losses in many lines of insurance, according to Munich Re. Many losses are unseen, and the result of secondary events, making it difficult to assess the extent of losses involved.

For example, losses to the agriculture industry can run into the billions of dollars in drought years as harvest failures lead to multi-peril crop insurance claims and livestock losses may result from shortage of feed and heat-related stress. Long dry periods also create ideal conditions for promoting the outbreak and spread of wildfires.

In 2011 Texas suffered a severe drought and overall and insured wildfire losses in that state were also the highest ever recorded, Munich Re explains.

Heat waves have also been linked to an increased risk of mortality and heat-related stress with the potential to impact health and life insurance.

I.I.I.  provides facts and statistics on droughts and heat waves here  and  a  useful backgrounder  on crop insurance here.

Active Wildfire Season Likely

Nearly 37 percent of the United States and more than 98 percent of the state of California is in some form of drought, according to the latest U.S. Drought Monitor.

Its weekly update shows that more than 44 percent of California is now in a state of exceptional drought, with little relief in sight.

The report says:

Continued dryness resulted in an expansion of Exceptional Drought (D4) in northwest California. Statewide snowpack remains at 5 percent as of April 6, 2015.”

Here’s the visual on that:

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What  could this mean for wildfire season?

The April 1 Outlook issued by the National Interagency Fire Center warned that parts of California will likely see increased wildfire activity earlier than usual thanks to the effects of the long-term drought.

Here’s what the significant wildfire potential looks like by June and July:

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Meanwhile, the National Oceanic and Atmospheric Administration’s (NOAA) recently issued Spring Outlook calls for drought conditions to persist in California, Nevada and Oregon through June with the onset of the dry season in April.

In its Outlook, NOAA said:

If the drought persists as predicted in the Far West, it will likely result in an active wildfire season, continued stress on crops due to low reservoir levels, and an expansion of water conservation measures.”

I.I.I. facts and statistics on wildfires and insurance are available here.

 

Drought, Water Management and Business Risk

Drought continues to make the headlines, with the latest U.S. Drought Monitor showing moderate to exceptional drought covers 30.6 percent of the contiguous United States.

Its weekly update also shows that 82 percent of the state of California is in a state of extreme or exceptional drought. Reservoir levels in the state continued to decline, and groundwater wells continued to go dry, the U.S. Drought Monitor says.

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The LA Times reports that California’s historic drought has 14 communities on the brink of waterlessness. It quotes Tim Quinn, executive director of the Association of California Water Agencies, saying that communities that have made the list are often small and isolated and have relied on a single source of water without backup sources.

However, Quinn also tells the LA Times that if the drought continues, larger communities could face their own significant problems.

A recent article at CFO.com by Lauren Kelley Koopman, a director in PwC’s Sustainable Business Solutions practice,  makes the point that when water-related disruptions affect operations, companies can suffer significant profit and losses and pay higher prices for goods in the supply chain.

Water management issues pose significant operational, regulatory and reputational risks to companies, the article noted.

And a recent report from the University of California found that farmers had spent an extra $500m in pumping extra water to cope with the state’s drought, while the total economic cost to the state’s agricultural industry  reached $2.2bn.

For insurers, droughts can be costly. Drought, wildfires and heat waves caused 29 deaths and $385 million in insured losses in the U.S. in 2013, according to Munich Re.

In 2012, drought in various parts of the U.S. caused $15 billion to $17 billion in insured losses, making it the second costliest disaster after Hurricane Sandy.

Drought Intensifies Across California

An article in The New York Times over the weekend gave a frightening account of the ongoing severe drought across California that is now threatening the state’s water supply.

As farmers, ranchers and homeowners brace for what could be the state’s worst drought in 500 years, The NYT reports that the snowpack in the Sierra Nevada, which supplies much of California with water during the dry season, was at just 12 percent of normal last week, reflecting the lack of rain or snow in December and January.

The NYT quotes Tim Quinn, executive director of the Association of California Water Agencies, saying:

We are talking historical drought conditions, no supplies of water in many parts of the state. My industry’s job is to try to make sure that these kind of things never happen. And they are happening.†

The latest U.S. Drought Monitor, published last Thursday, put 9 percent of the state of California into “Exceptional Drought† – the worst possible category of drought. According to Dr. Jeff Masters’ WunderBlog this is the first time since the Drought Monitor product began in 2000 that a portion of California was put into “Exceptional Drought.†

Meanwhile, parts of the state experiencing “Extreme Drought,† the second worst category of drought, increased to 67 percent.

The U.S. Drought Monitor notes that a few of the impacts within the “Exceptional Drought† areas include fallowing of land, wells running dry, municipalities considering drilling deeper wells, and little to no rangeland grasses for cattle to graze on, prompting significant livestock sell off.

Over at Slate.com Eric Holthaus says that puts the current California drought on par with recent major droughts in Texas (2010-11) and the Midwest (2012), both of which were multibillion-dollar disasters.

For insurers, droughts can be costly too. According to analysis by Munich Re, drought in various parts of the U.S. in 2012 caused $15 billion to $17 billion in insured losses, making it the second costliest disaster after Hurricane Sandy.

Check out I.I.I. information on crop insurance.

Wildfire Risk Potential Grows Amid Hot and Dry Weather

It’s mid-July and for many parts of the United States this means persistent hot and dry weather increases the risk of wildfires.

Some 46 percent of the contiguous United States is currently experiencing moderate to exceptional drought conditions, according to Tuesday’s report from the U.S. Drought Monitor.

The first monthly drought outlook from NOAA’s Climate Prediction Center recently warned that drought in the U.S. Southwest is exceptionally intense and unlikely to break completely, despite some relief from the summer thunderstorm season. Most of the already parched West will likely see drought persist or worsen, NOAA said.

Meanwhile, the Wall Street Journal reports that overgrown forest land poses fire risk to a growing number of communities.

It cites U.S. Forest Service statistics that 65 million to 82 million of National Forest lands are at a “high or very high risk of fire† and are in need of restoration.

Between 1960 and 1970, there was only one year, 1969, when wildfires burned more than five million acres in the U.S. In the last decade, it happened eight out of 10 years, the WSJ adds.

As of July 1, some 11 wildfire, heat and drought events have resulted in an estimated $365 million in insured losses in 2013, according to Munich Re.

Aon’s June Global Catastrophe Recap notes that the Black Forest Fire near Colorado Springs became the most damaging fire in Colorado’s history and left two dead. The fire charred 14,280 acres of land and destroyed at least 511 homes. Insurers received at least 4,500 claims with payouts in excess of $350 million. Due to dozens of destroyed uninsured or underinsured homes, the overall economic loss will approach $500 million, Aon added.

On June 30, 19 firefighters were killed while working to contain the Yarnell Hill Fire in Arizona. This is the deadliest event for firefighters since 9/11 and the third highest firefighter death toll attributed to wildfires.

More information is available via Insurance Information Institute (I.I.I.) facts and statistics on wildland fires and droughts and heat waves.

Swiss Re Reports on Catastrophe Losses

As the United States braces for another drought in the coming months, Swiss Re reports that record heat and extremely dry weather conditions in the United States in 2012 led to one of the worst droughts in recent decades and the highest ever recorded loss in agriculture insurance.

Thomas Holzheu, Swiss Re’s Chief Economist in the U.S., says:

Severe crop failures in the U.S. Corn Belt resulted in insured agricultural losses of $11 billion. This makes the 2012 drought the highest ever recorded loss in agriculture insurance history.†

Swiss Re’s latest sigma study reveals that worldwide natural catastrophes and man-made disasters in 2012 caused insured losses of $77 billion – making 2012 the third most costly catastrophe year on record. Still, this is significantly lower than 2011 when record earthquakes and flooding in Asia Pacific caused insured losses of over $126 billion, the highest ever recorded.

Overall economic losses from natural catastrophes and man-made disasters in 2012 reached $186 billion, with approximately 14,000 lives lost.

Hurricane Sandy was the most costly event for the year, causing $70 billion in economic losses and $35 billion in insured losses (of which $20 billion to $25 billion was covered by private insurers and the remainder by the National Flood Insurance Program (NFIP)).

In fact, nine of the 10 most expensive insured loss events happened in the U.S. in 2012. Fortunately, the high insurance penetration in North America meant that $65 billion – over half of the $119 billion in economic losses in the region – were covered by insurance.

Check out I.I.I. facts+stats on global catastrophes.