Entries tagged with “Flood Insurance”.


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.

Flood risk threatens more people around the world than any other natural catastrophe, according to a new report from Swiss Re.

Across the 616 metropolitan areas included in the study, river flooding poses a threat to over 379 million residents. That’s more than the 283 million inhabitants potentially affected by earthquakes and the 157 million people at risk from windstorms.

When these natural catastrophes occur they not only affect millions of people but can also significantly disrupt the local and national economy.

Urban dwellers in Asia’s megacities are especially at risk, with Tokyo, Manila and Hong Kong-Guangzhou topping the population-at-risk index, Swiss Re says. Although smaller in size, European and U.S. cities could also face huge economic repercussions in the event of a major disaster.

Swiss Re’s report finds that metropolitan areas such as Tokyo, Los Angeles, New York and Amsterdam-Rotterdam rank high in terms of potential lost productivity, measured by the value of working days lost.

For example, the report shows that while a devastating earthquake in Los Angeles could affect just as many people as in Jakarta, the resulting value of working days lost would be 25 times higher.

Based on Swiss Re’s risk models and detailed hazard data, the report provides a global risk index comparing the human and economic exposure of 616 cities around the world. Together, these are home to 1.7 billion people and produce a combined GDP of $35 trillion, half of the world’s total economic output.

Swiss Re notes:

Investments in infrastructure are vital to strengthen the resilience of metropolitan areas. The potential damage that a large natural disaster can cause to roads, bridges, telecommunications and other essential infrastructure is perhaps nowhere more apparent than in the world’s big cities. This is why strengthening urban resilience is also a prime concern for the insurance industry. As an ultimate risk taker, the insurance industry has a vested interest in new infrastructure investments, upgrades to ageing infrastructure and adaptation measures.”

Flood events continue to dominate natural catastrophe losses in 2013, according to the latest Global Catastrophe Recap report from Aon Benfield.

The report reveals that billion-dollar flood losses were recorded in China, Russia, Philippines, and Pakistan during August 2013, causing an initial combined estimate of $10 billion in economic losses.

Additional flood events were recorded in Afghanistan, Niger, Sudan, Mali, Laos, Cambodia, India, and the United States.

In a press release Steve Jakubowski, president of Impact Forecasting, says:

The flood events during the month of August continues a similar theme that has been observed throughout the year, as the flood peril has proven the most costly – so far – during 2013. Economic losses from flood events have equated to more than 40 percent of overall losses sustained this year.”

He adds:

This highlights the need for insurers to further appreciate the impact of the flood peril through improved analysis and understanding of significant events and utilizing that learning curve to further strengthen the development, and usage, of catastrophe models.”

In the U.S., a severe weather event affected the Midwest and the Plains in early August, causing at least two fatalities. The states of Minnesota and Wisconsin were hardest-hit. Total economic losses were estimated at $1.0 billion, with insured losses in excess of $625 million.

Excessive rainfall also prompted major flooding between August 5 and 12 throughout parts of five states. More than 2,000 homes sustained flood damage in Missouri and Kansas alone due to inundated basements or backed-up sewers. Additional flood damage occurred in Tennessee, Arkansas and Oklahoma. Total economic losses were estimated by state governments at roughly $25 million.

In other U.S. catastrophe news, Aon noted that the Rim Fire became the fourth largest wildfire in California’s history.

Check out I.I.I. facts and statistics on flood insurance.

While 2013 so far has been a below-average catastrophe loss year for the global insurance industry, this could easily change in the coming months, Swiss Re warned yesterday.

Just-released sigma estimates put total economic losses from natural catastrophes and man-made disasters at $56 billion in the first half of 2013, of which $20 billion was insured.

Insured losses from natural catastrophes totaled $17 billion, with flooding a main driver.

In a press release, Kurt Karl, chief economist at Swiss Re says:

Though 2013 has so far been a below-average loss year, the severity of the ongoing North Atlantic hurricane season, and other disasters such as winter storms in Europe, could still increase insured losses for 2013 substantially.”

Flooding accounted for some $8 billion of the $17 billion in global insured losses from natural catastrophes in the first half.

As a result, 2013 is already the second most costly calendar year in terms of insured flood losses on sigma records.

Check out I.I.I. facts and statistics on global catastrophes here.

In other news, the late summer edition of Cavalcade of Risk, a round-up of risk related posts from around the blogosphere, is now live over at My Personal Finance Journey. Our recent post on cyber insurance is among the featured posts.

As we approach the peak of hurricane season, catastrophe modeler RMS has warned that storm surge poses a greater risk than hurricane wind.

RMS says its updated North American hurricane model shows there is a 20 percent chance that storm surge loss will be greater than wind loss for any U.S. hurricane that makes landfall. And for the northeast coast of the U.S. the risk is even higher.

Dr. Claire Souch, vice president, model solutions at RMS says:

Our model shows there is a 20 percent chance that storm surge loss will be greater than wind loss for any U.S. hurricane that makes landfall, which rises to almost 40 percent along the northeast coast of the United States – this is a risk the market can no longer afford to ignore.”

RMS’ updated North Atlantic hurricane model suite includes the ability to fully quantify the risk from catastrophic hurricane-driven storm surge.

An earlier paper by RMS on Superstorm Sandy made the point that storm surge loss can drive more insurance loss than hurricane wind.

In the paper RMS noted that while Sandy was not even classified as a hurricane at landfall, it caused a Category 2 storm surge in New York City:

This is not the first time that storm surge has had a dominant effect. It was responsible for more than half of the total loss from 2005’s Hurricane Katrina, which was a Category 3 storm at landfall, but had a Category 5 equivalent storm surge.”

Recent analysis by CoreLogic estimates that more than 4.2 million U.S. residential properties are exposed to storm-surge risk valued at roughly $1.1 trillion, with more than $658 billion of that risk concentrated in 10 major metro areas.

According to I.I.I. facts and stats on flood insurance, Hurricane Sandy was the second costliest U.S. flood, based on National Flood Insurance Program (NFIP) payouts as of July 12, 2013.

An annual report from CoreLogic reveals that the number and value of total properties along the Atlantic and Gulf coasts at risk of hurricane-driven storm surge is increasing significantly.

In its 2013 analysis CoreLogic estimates that more than 4.2 million residential properties are exposed to storm-surge risk valued at roughly $1.1 trillion, with more than $658 billion of that risk concentrated in 10 major metro areas.

Florida tops the state rankings with nearly 1.5 million properties at risk and $386 billion in total potential exposure to damage.

Louisiana ranks second in total properties at risk with just over 411,000 homes in storm-surge zones, while New York ranks second in total value of coastal properties exposed at nearly $135 billion.

At the local level, the New York metropolitan area, which encompasses northern New Jersey and Long Island as well, contains not only the highest number of homes at risk for potential storm-surge damage, but also the highest total value of residential property exposed, at more than $200 billion.

CoreLogic makes the point that extensive regions along both the Gulf and Atlantic coasts are vulnerable to storm surge, and yet the homeowners who live in these areas are not required to carry flood insurance because they are not located within a designated FEMA 100-year floodplain.

It says:

Homeowners who live outside of the FEMA Special Hazard Flood Areas (SFHA), especially in the Northeast, would have little reason to carry flood insurance, given that they may not be aware of the risk storm surge poses to their properties.”

For that reason, fully understanding the number and value of homes at risk of sustaining storm-surge damage allows insurance providers to improve underwriting policies and procedures.”

CoreLogic notes that public awareness of the risk hurricane-driven storm surge poses to coastal homeowners has never been higher coming off the heels of Hurricane Sandy last fall.

A press release quotes Dr. Howard Botts , vice president and director of database development for CoreLogic Spatial Solutions:

Sandy was a harsh reminder of the potential destruction associated with storm-surge flooding, and of just how many communities are vulnerable to that risk, in areas typically assumed to be relatively safe from hurricanes along the northeastern Atlantic shoreline.”

According to I.I.I. facts and statistics on flood insurance, Hurricane Sandy was the sixth costliest U.S. flood, based on National Flood Insurance Program (NFIP) payouts as of March 7, 2013.

With the June 1 start of the 2013 Atlantic hurricane season just one month away the Insurance Information Institute (I.I.I.) is urging people to prepare for heightened flood risks that come with hurricanes and tropical storms.

The I.I.I. notes that the most recent two hurricane seasons have shown how devastating the consequences of seasonal flooding can be, with losses felt well beyond the high risk areas nearest the water:

While coastal states have an increased risk of flooding during hurricane season, it is important to note that flood risks extend far beyond those areas. Some of the most severe flooding has occurred when the remnants of a hurricane or tropical storm system traveled inland, such as Hurricane Irene two years ago, producing heavy rainfall hundreds of miles from the coast. For this reason, it is important to have coverage no matter where you live.”

Flood damage is excluded under standard homeowners and renters insurance policies. Residential flood insurance is available in the form of a separate policy primarily from the National Flood Insurance Program (NFIP).

A 2012 poll by the I.I.I. found that 13 percent of American homeowners had a flood insurance policy, virtually unchanged from the 14 percent of homeowners in 2011, but well below the 17 percent who said they purchased flood insurance in May 2008.

Many homes that sustained flood damage from Superstorm Sandy did not have flood insurance, according to joint research by the Wharton Risk Center and Resources for the Future.

For example, along the entire New York coast, take up rates were lower than 30 percent in most ZIP codes. Take-up rates along the New Jersey coast were apparently higher than New York, particularly in Manhattan.

Check out I.I.I. information on flood insurance here.

Odds favor above-average spring temperatures across much of the continental United States, including drought-stricken areas of Texas, the Southwest and the Great Plains, according to NOAA’s Annual Spring Outlook.

NOAA says spring promises little drought relief for most of these areas, as well as Florida, with below- average spring precipitation favored there.

Right now 51 percent of the continental U.S.—primarily in the central and western regions—is in moderate to exceptional drought.

NOAA says drought conditions are expected to persist, with new drought development, in California, the Southwest, the southern Rockies, Texas, and Florida.

Meanwhile, river flooding is likely to be worse than last year across the country, with the most significant flood potential in North Dakota.

After a year of reprieve, the Red River of the North between eastern North Dakota and northwest Minnesota, and the Souris River in North Dakota have the potential for moderate and major flooding, NOAA says.

The melting of late-season snow may also cause minor to moderate flooding in the upper Mississippi River basin, including southern Wisconsin, northern Illinois and northern Missouri.

Areas along the middle Mississippi, lower Missouri and Ohio River basins have already experienced minor flooding this year and the threat of minor flooding will continue through the spring, NOAA adds.

A 2012 poll by the Insurance Information Institute found that 13 percent of American homeowners had a flood insurance policy, virtually unchanged from the 14 percent of homeowners in 2011, but well below the 17 percent who said they purchased flood insurance in May 2008.

Flood damage is excluded under standard homeowners and renters insurance policies. Residential flood insurance is available in the form of a separate policy primarily from the National Flood Insurance Program (NFIP).

Many homes that sustained flood damage from Sandy did not have flood insurance, according to joint research by the Wharton Risk Center and Resources for the Future.

For example, along the entire New York coast, take up-rates are lower than 30 percent in most ZIP codes.

Take-up rates along the New Jersey coast seem to be higher than New York, particularly in Manhattan.

Residential flood insurance in the U.S. is primarily provided through the federally-run National Flood Insurance Program (NFIP).

The analysis shows that the state of New York has about 169,000 NFIP policies-in-force, representing $42 billion in coverage.

New Jersey is the fifth-ranked state by approximate number of NFIP policies-in-force, with about 236,000 policies-in-force, representing $55 billion in coverage.

The Wharton brief notes:

As is clear from the figures, there are higher take-up rates in coastal communities, most likely because residents are aware of the higher risk they face. That said, even in heavily flooded areas, they are still fairly low.

Given the highly populated areas where Sandy hit, this disaster is likely to cost the NFIP billions of dollars, while it’s already running a $17 billion deficit.”

A recent article by the New York Times suggested that Hurricane Sandy will rank as the nation’s second-worst storm for claims paid out by the NFIP. Hurricane Katrina triggered nearly $18 billion in claim payments by the NFIP.

Interestingly, only a handful of states account for the vast majority of policies and coverage in the NFIP. Wharton says the top five states by approximate number of policies-in-force are:

1. Florida: 2.06 million policies ($475 billion in coverage)
2. Texas: 650,000 policies ($162 billion)
3. Louisiana: 484,000 ($112 billion)
4. California: 260,000 ($68 billion)
5. New Jersey: 236,000 ($55 billion)

Earlier this summer a report by CoreLogic revealed that over four million homes in the U.S. along the Atlantic and Gulf coasts are at risk of hurricane-driven storm-surge damage, with more than $700 billion in total property exposure.

Check out I.I.I. information on flood insurance.

Word from the National Hurricane Center (NHC) this morning is that Isaac – on the verge of hurricane status – poses a significant storm surge and freshwater flood threat to the northern Gulf coast.

The combination of a storm surge and the tide will cause normally dry areas near the coast to be flooded by rising waters. The water could reach the following depths above ground if the peak surge occurs at the time of high tide…”

NHC is projecting potential storm surge levels as follows:

- Southeast Louisiana and Mississippi: 6 to 12 ft

- Alabama: 4 to 8 ft

- South-central Louisiana: 3 to 6 ft

- Florida Panhandle: 3 to 6ft

- Florida West Coast including Apalachee Bay: 1 to 3 ft

Remember a recent report from CoreLogic warned that over four million homes along the U.S. Atlantic and Gulf Coasts are at risk of hurricane-driven storm-surge damage, with more than $700 billion in total property exposure.

Along the Gulf coast, there are just under 1.8 million homes at risk, valued at nearly $200 billion, CoreLogic said.

The Insurance Information Institute (I.I.I.) reminds us that the top 10 most costly flood events in the U.S. ranked by National Flood Insurance Program (NFIP) payouts are associated with hurricanes or tropical storms.

Here’s a satellite animation of Isaac’s path through the Caribbean and into the eastern Gulf of Mexico, courtesy of NOAA’s GOES-13 satellite: