Tag Archives: Flood Insurance

Hawaii, Florida, Georgia and North Carolina Prepare for Storms

With numerous tropical systems in the Atlantic and two major hurricanes (Madeline and Lester) threatening Hawaii in the Pacific, insurers are keeping a close watch to see how things develop.

Over at Wunderblog, Dr. Jeff Masters observes that the dual scenario of two major hurricanes heading towards Hawaii is unprecedented in hurricane record keeping.

Hurricane Madeline, the closer of the two to Hawaii, intensified rapidly, growing from tropical storm to Category 3 strength in just 24 hours, Dr. Masters notes, and has since intensified to Category 4.

While the forecast models are not conclusive on the exact tracks and intensity of these named storms, it’s clear that both Hurricane Madeline and Hurricane Lester could affect Hawaii with high surf, torrential rain, and potential winds over the next week.

Hawaii’s costliest hurricane, based on insured property losses, was Hurricane Iniki in September 1992. Iniki caused $1.6 billion in damage when it occurred, or $2.7 billion in 2014 dollars, according to the Insurance Information Institute (I.I.I.).

Check out the I.I.I.’s Hawaii Hurricane Insurance Fact File for more information, including the top writers of homeowners, commercial and auto insurance.

Meanwhile, on the U.S. Atlantic coast, a tropical storm warning is in effect for the coast of North Carolina from Cape Lookout to Oregon Inlet for tropical depression eight.

A second system—tropical depression nine— is also being closely watched in the Gulf of Mexico. In its latest public advisory, the National Hurricane Center says the system is set to strengthen and that interests in central and northern Florida, and southeastern Georgia should monitor its progress.

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I.I.I.’s Florida insurance representative Lynne McChristian offers some sound advice on making sure your property insurance is ready for named storms in her latest blog post.

Take a look at I.I.I.’s North Carolina Hurricane Insurance Fact File, Georgia Hurricane Insurance Fact File, and Florida Hurricane Fact File for more information.

Louisiana Flooding Underscores Insurance Need

The ongoing flooding in Louisiana is being described as the worst natural disaster to strike the United States since Superstorm Sandy of 2012.

Latest reports indicate that at least 11 are confirmed dead and more than 30,000 have been rescued. An estimated 40,000 homes have sustained flood damage statewide, but local reports put that figure higher.

Some 20 Louisiana parishes have now received a federal disaster declaration.

Flood damage is excluded under standard homeowners and renters insurance policies, but available as a separate policy both from the National Flood Insurance Program (NFIP) and some private insurers.

So, what would a superstorm Sandy-type event look like in terms of NFIP payouts?

According to the I.I.I., superstorm Sandy was the second costliest U.S. flood, based on NFIP payouts as of June 2016.

“Superstorm Sandy which occurred in October 2012, resulted in $8.2 billion in NFIP payouts as of June 2016, second only to 2005’s Hurricane Katrina with $16.3 billion in payouts.”

There were 130,214 NFIP claims from superstorm Sandy as of June 2016. The average paid loss was $63,352, compared with 167,984 claims from Katrina, with an average paid loss of $97,142.

All these figures are preliminary as claims are still being processed, the I.I.I. notes.

While flood insurance penetration rates are reported to be relatively low in the affected parishes, time will tell how the Louisiana flood stacks up among major U.S. flood disasters.

In 2015 and 2016 the states of Texas, Louisiana, Mississippi, South Carolina and West Virginia have experienced devastating rainfall-induced flooding, resulting in billions of dollars in economic losses.

Here’s a look at the top 10 most significant flood events by NFIP payouts:

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A massive relief operation mounted by the American Red Cross is expected to cost at least $30 million and that number may grow as the scope and magnitude of the devastation in Louisiana becomes clearer.

Check out this I.I.I. issues update on flood insurance for more background on the topic.

Being Prepared for Summertime Flash Floods

Several regions of the country appear to be under flash flood watches and/or warnings as we head into the weekend, underscoring the risk of summertime flooding from slow-moving thunderstorms or excessive rainfall and the need to be prepared.

Weather Underground reports that the threat of flash flooding, and eventually river flooding, will become more widespread from Texas and Louisiana to the Ohio Valley and parts of the Great Lakes in the coming days.

Flash flooding is already reported to be serious in parts of Louisiana and Mississippi as of Friday morning.

Climate scientists believe that the number and volatility of extreme intense precipitation events is on the rise due to the changing climate.

Munich Re describes flash floods as a much underestimated risk:

“While media interest tends to focus on storm surges and river floods, the risk of flooding in places away from rivers and lakes is generally overlooked.”

Flash floods typically occur as independent, localized and random events and unlike river flooding, it’s the intensity rather than the total amount of rainfall that is the concern.

A recent report by FM Global warned that U.S. businesses, depending on their location, should start preparing now for increased, extreme rainfall that a changing climate will likely deliver.

Certain regions of the United States are expected to be prone to more intense precipitation events and a potentially increased risk of flooding, FM Global said. Here’s the graphic:

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Buildings, machinery, data centers, transportation networks, supply chains, people and sales can all be affected by extreme wet conditions, according to the report. When companies have a choice, they should site their facilities in nothing less than 500-year flood zones (where there’s only a 1-in-500 chance of a flood every year), it suggests.

Businesses should also sharpen their focus on water management, diverting water from property, optimizing drainage and protecting water supplies, and considering new weather extremes when managing supply chains.

For any home or business the purchase of flood insurance is key to being prepared for flash flooding, or any kind of flooding event, according to the Insurance Information Institute. Flood damage is excluded under standard homeowners and renters insurance policies, but available as a separate policy both from the National Flood Insurance Program and some private insurers.

Check out these Insurance Institute for Business and Home Safety (IBHS) resources on steps you can take to protect your home or business from flood damage.

Billion-Dollar Insured Disaster Events Add Up

The first half of 2016 saw at least six individual billion-dollar insured disaster events globally, three of which occurred in the United States, according to Aon Benfield’s Global Catastrophe Recap: First Half of 2016.

Four of these events crossed the multi-billion dollar threshold ($2 billion and greater).

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As seen in the chart above the most costly event was a series of earthquakes that struck Japan’s Kumamoto prefecture in April with total insured losses—including losses due to physical damage and business interruption—expected to total in excess of $5 billion.

Other major loss events in the first half included:

—the late May and early June flooding and severe weather (Storm Elvira) in Europe ($3.4 billion insured losses);

—the Fort McMurray wildfire ($3.2 billion insured losses);

—the April 10-15 severe convective storm outbreak in the central United States ($3.2 billion insured losses).

Aon Benfield notes that all of the estimates from both public and private insurers are subject to revision as losses are further developed.

A deeper dive into the data reveals that there were at least 14 events that minimally cost insurers $500 million in the first half of 2016, eight of which were recorded in the U.S. and were all severe convective storm or flood-related.

Globally, public and private insurers endured an elevated level of disaster losses—$30 billion—during the first half of 2016, some 60 percent higher than the $19 billion sustained in 2015. The U.S. sustained the highest level of insurable losses at $14 billion.

The aggregated $30 billion was only the third time on record that first and second quarter losses reached that threshold—even after adjusting for inflation to today’s dollars, Aon Benfield said.

Check out Insurance Information Institute facts and statistics on global catastrophes here.

June Flood Losses Highlight Insurance Protection Gap

The economic cost of flood losses worldwide in June will exceed $5 billion, though the insured loss portion will be significantly less, according to Aon Benfield’s latest Global Catastrophe Recap.

Impact Forecasting, the cat modeling center of Aon Benfield, reports that major June floods highlighted by China and U.S. events, saw the global economic toll mount.

Seasonal “Mei-Yu” monsoon rains led to multiple rounds of significant flooding across central and southern parts of China throughout June, resulting in more than 130 fatalities.

The most damaging floods occurred in the Yangtze River basin as rivers and tributaries overflowed their banks and minimally inundated 200,000 homes. Beyond property damage, there were substantial impacts to the agricultural sector.

Impact Forecasting said:

“Total aggregated economic losses were estimated by the Ministry of Civil Affairs at upwards of CNY29 billion (USD4.4 billion). Given low penetration levels, the insured loss portion was only a small fraction of the overall damage cost.”

Exceptional rainfall in the U.S. state of West Virginia also led to catastrophic flooding in several counties. The federal government declared a disaster after major damage occurred in Clay, Fayette, Greenbrier, Kanawha, Monroe, Nicholas, Roane, and Summers counties, As many as 5,500 homes and 125 businesses were damaged or destroyed.

“Total economic losses were anticipated to reach into the hundreds of millions of dollars. The insured loss portion of the loss was expected to be less given rather low up-take in the National Flood Insurance Program (NFIP).”

Additional major flood events in the month of June occurred in India, Indonesia, Myanmar, and Ghana, according to the report.

The gap between economic and insured losses for both major flood events in China and the U.S. illustrates the need for greater insurance penetration around the globe.

A 2015 Swiss Re report estimated the current annual disaster protection gap between insured and total losses at around $153 billion, assuming an average catastrophe loss year.

In absolute terms, the U.S., Japan and China account for more than half that amount, with a combined annual shortfall of $81 billion, Swiss Re said.

A 2015 poll by the Insurance Information Institute found that 14 percent of American homeowners had a flood insurance policy. This percentage has been at about the same level every year since 2009.

Global Insured Disaster Losses in May: $7 billion and Counting

At least $7 billion—that’s how much global disasters and severe weather are expected to cost insurers and reinsurers in May.

Aon Benfield’s latest Global Catastrophe Recap Report notes that the Fort McMurray wildfire in Alberta, Canada, will become the costliest disaster in the country’s history.

Insured losses—including physical damage and business interruption—are expected to be in excess of $3.1 billion, while total economic losses will be well into the billions of dollars.

The fire charred more than 580,000 hectares (1.43 million acres) of land and destroyed at least 10 percent of Fort McMurray, including more than 2,400 homes and other structures.

Remarkably, no direct casualties were reported from the event as it prompted the largest evacuation in the history of Alberta.

Adam Podlaha, global head of Impact Forecasting, says:

“The severity of wildfire damage in Fort McMurray is an unfortunate reminder of how significant insurable losses can be from the peril.”

And:

“Since this is just the sixth individual global wildfire to surpass the billion-dollar threshold for insurers, there is not a lot of precedent for a fire event of this magnitude.”

Check out Insurance Information Institute wildfire facts and statistics here.

Elsewhere, severe weather and flooding in Europe where the storm ‘Elvira’ swept across parts of northern Europe between late May and early June caused most damage in Germany, France, Austria, Poland and Belgium, where floods impacted many major metro regions, including Paris.

Preliminary estimates from industry associations in France (MAIF) and Germany (GDV) put the estimated combined minimum claims payouts at in excess of $2.3 billion, while overall economic damage is tentatively estimated at $4.6 billion.

May also saw no fewer than five outbreaks of severe convective storms in the United States, affecting parts of the Plains, Midwest, and Mississippi Valley. Storm-related flooding also caused major damage in parts of Texas.

Total aggregated insured losses were estimated at over $1 billion, Aon’s Impact Forecasting unit said.

Meanwhile, Cyclone Roanu brought torrential rain to Sri Lanka, eastern India, Bangladesh, Myanmar and China during May, damaging or destroying nearly 125,000 homes and structures across all five countries. Estimated reconstruction costs were put at $1.7 billion, though insured losses are substantially less due to low insurance penetration.

Even after all that, May was not done, with other notable natural hazard events around the globe, including:

—Five separate instances of flooding impacted China as aggregated economic losses topped $1.5 billion. Most of the damage was attributed to agricultural interests.

—Other major flood and landslide events in May were reported in parts of Hispaniola, Kenya, Tajikistan, Afghanistan, Rwanda, Ethiopia, India and Yemen.

—Tropical Storm Bonnie brought heavy rainfall to portions of the Carolinas and Georgia in the United States at the end of May and into June. Total economic losses were expected to be minimal.

—Earthquakes in Ecuador and China caused damages to thousands of homes and a winter weather outbreak in northern China caused damage to crops totaling $61 million.

Top Metro Areas Have More to Lose When a Hurricane Hits

Latest Atlantic hurricane season forecasts are focused on the numbers – how many storms can we expect? and how many of those will be major hurricanes? NOAA, Colorado State University and Tropical Storm Risk cast their predictions here, here and here.

But as the latest storm surge analysis from CoreLogic indicates, it is where a hurricane hits land that is often a more important factor than the number of storms that may occur during the year.

Why?

More than 6.8 million homes located along both the Gulf and Atlantic coasts of the United States are at risk of hurricane-driven storm surge, with a total reconstruction cost value (RCV) of just over $1.5 trillion, according to CoreLogic.

But the disproportionate numbers of at-risk homes in just 15 major metropolitan areas means that where the storm makes landfall can make all the difference in terms of property damage and loss of life.

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CoreLogic’s analysis reveals that some 67 percent of the 6.8 million total at-risk homes and 68 percent of the total $1.5 trillion RCV is located within 15 major metropolitan areas.

That’s 4.6 million homes, with total RCV of just over $1 trillion located in urban centers along the Gulf and Atlantic coasts including Miami, New York City, New Orleans, Houston, Philadelphia, Charleston and Boston.

The Miami metro area, which includes Fort Lauderdale and West Palm Beach, tops the list with 780,482 at-risk homes and an RCV of $143.9 billion.

By comparison, the New York City metro area has slightly fewer homes with potential storm surge risk at 719,373, but a significantly higher RCV totaling $260.2 billion.

As CoreLogic says:

“History has shown us that a single low-level storm can cause substantial property loss and potential loss of life it it occurs in or near an area of dense development.”

It’s important to note that properties located outside of designated FEMA flood zones may still be at risk for storm surge inundation.

However, only homes located within FEMA-designated high risk flood areas are required to carry flood insurance through the National Flood Insurance Program.

A 2015 poll by the Insurance Information Institute found that 14 percent of American homeowners had a flood insurance policy. This percentage has been at about the same level every year since 2009.

More on Historic South Carolina Floods

The expected $2 billion minimum economic cost of the South Carolina and eastern U.S. floods in early October will place the event as one of the top 10 costliest non-tropical cyclone flood events in the country since 1980.

Aon Benfield’s latest Global Catastrophe Recap report, which evaluates the impact of natural disaster events occurring worldwide during October 2015, reveals that already public and private insurers have reported more than $400 million in payouts from the event.

Days of relentless record-setting rainfall caused by a complex atmospheric set-up brought tremendous flooding across much of South Carolina, leaving at least 19 dead, Aon reported.

The event caused considerable flood inundation damage to residential and commercial properties, vehicles, and infrastructure after more than two feet (610 millimeters) of rain fell from October 1 to 5.

Aon noted that the minimum $2 billion in total economic losses from the event includes infrastructure and $300 million in crop damage.

Preliminary reports from insurers suggest roughly $350 million in claims.

However, additional insured losses of at least $100 million are expected via the federal National Flood Insurance Program (NFIP) and the USDA RMA crop insurance program.

A recent  article  by Insurance Journal noted that the potential exposure home insurers in South Carolina face from the early October event is estimated at $18 billion. That’s according to figures by catastrophe modeling firm CoreLogic.

According to the Insurance Information Institute (I.I.I.), none of the 10 largest floods as ranked by NFIP payouts occurred in South Carolina (see below).

However, the state was affected by three of the most costly U.S. hurricanes: Hurricanes Charley and Frances in 2004 and Hurricane Hugo in 1989.

The list  includes events from 1978 to June 30, 2015, as of August 21, 2015.

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Storm Surge Risk Rising Along U.S. Coast

While there’s much focus on storm surge risk in New Orleans as we mark the 10th anniversary of Hurricane Katrina, two new reports highlight the vulnerability of other U.S. coastal cities to storm surge flooding.

An analysis by Karen Clark & Co ranks the U.S. cities most vulnerable to storm surge flooding based on losses to residential, commercial and industrial properties from the 100 year hurricane.

The findings may surprise you.

KCC reveals that some of the cities most vulnerable to storm surge flooding have not been impacted for decades. A few have not experienced a direct hit from a major hurricane in the historical record.

Tampa/St. Petersburg, Florida is the metropolitan area most vulnerable to storm surge flooding, according to KCC, with a loss potential of $175 billion.

Four of the top cities (Tampa, Miami, Fort Myers and Sarasota) are in Florida, and the west coast of the state is more vulnerable than the east coast.

In fact, three cities–Tampa, New Orleans and New York–will likely have losses exceeding $100 billion from the 100 year event.

KCC notes that most of the flood damage potential is currently not insured, and that “private flood insurance presents a significant opportunity for insurers that have the right tools for understanding the risk.”

Meanwhile, a new report by catastrophe modeling firm RMS, took a look at six coastal cities in the U.S. to evaluate how losses from storm surge are expected to increase in the next 85 years and found that cities such as Tampa, Miami and New York face greater risk of economic loss from storm surge.

To evaluate risk, RMS compared the chance of each city sustaining at least $15 billion in economic losses from storm surge–the amount of loss that would occur if the same area of New Orleans was flooded today as was flooded in 2005.

Based on its findings, Tampa has a 1-in-80 chance of experiencing at least $15 billion storm surge losses this year, followed by Miami with a 1-in-125 chance and New York with a 1-in-200 chance.

New Orleans still faces significant risk, with a 1-in-440 chance of at least $15 billion in economic losses related to a storm surge event, RMS noted.

Looking ahead to 2100, the likelihood of those cities sustaining this level of losses rises dramatically.

By then both Tampa and Miami will have a 1-in-30 chance of experiencing at least $15 billion in economic losses related to a storm surge event, while in New York the chance increases to 1-in-45 and in New Orleans to 1-in-315.

Here’s the visual on RMS’ findings via its infographic:

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GAO: How to Make Flood Insurance Attractive to Private Sector

Efforts to delay or repeal rate increases under the Biggert-Waters reforms to the National Flood Insurance Program (NFIP) would likely continue to increase the NFIP’s long-term burden on taxpayers.

They may also reinforce private insurers’ skepticism that they would ever be permitted to charge adequate rates and make their participation in the flood insurance market unlikely in the foreseeable future, according to a new Government Accountability Office (GAO) report.

In its analysis GAO notes that new technologies and a better understanding of flood risks may have increased private insurers’ willingness to offer flood coverage, but a key condition to their participation is the ability to charge rates that fully reflect the estimated risk of flooding.

GAO states:

As debates over the private sector’s role continue, one step to address the burden on low- and moderate-income policyholders could be taken immediately. As we have suggested previously, Congress could eliminate subsidized rates, charge full-risk rates to all policyholders, and appropriate funds for a direct means-based subsidy to eligible policyholders. The movement to full-risk rates would encourage private sector participation, and the explicit subsidy would address affordability concerns, raise awareness of the risks associated with living in harm’s way, and decrease costs to taxpayers, depending on the extent and amount of the subsidy.†

Even with increased private insurer participation in the flood insurance market, the GAO report foresees a continuing role for the federal government in the form of a residual market or NFIP reinsurer.

Insurance Journal has more on this story.

Check out this USA Today article on latest Congressional action to delay new flood insurance premiums.

Also check out I.I.I. facts and statistics on flood insurance.