Tag Archives: Hurricanes

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.

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.

Atlantic Hurricane Season Off to Early Start

Whichever way you slice it, NOAA’s just-released outlook for the 2016 Atlantic Hurricane Season appears to suggest we’re on track for more hurricane activity than we’ve seen in a while.

NOAA predicts a 70 percent chance of 10 to 16 named storms (winds of 39 mph or higher), of which 4 to 8 could become hurricanes (winds of 74 mph or higher), including 1 to 4 major hurricanes (Category 3, 4 or 5; winds of 111 mph or higher).

It calls for a 45 percent chance of a near-normal season, but there is also a 30 percent chance of an above-normal season. The likelihood of a below-normal season is at 25 percent.

NOAA2016AtlanticHurricaneOutlook

In the words of Dr Gerry Bell, lead seasonal hurricane forecaster with NOAA’s Climate Prediction Center:

“This is a more challenging hurricane season outlook than most because it’s difficult to determine whether there will be reinforcing or competing climate influences on tropical storm development.

“However, a near-normal prediction for this season suggests we could see more hurricane activity than we’ve seen in the last three years, which were below normal.”

To put that in context, the 2012 Atlantic hurricane season was extremely active and tied with 1887, 1995, 2010 and 2011 for having the third-most named storms on record.

Insurers paid out more than $26 billion in hurricane losses that year, including Superstorm Sandy which caused $19 billion in insured property losses.

With Bonnie threatening to develop into a tropical storm over the Memorial Day weekend, the Atlantic could have its second storm before the official start of hurricane season, which starts June 1, as the Insurance Information Institute reminds us here.

Bear in mind that NOAA’s outlook includes Hurricane Alex, a pre-season storm that formed over the far eastern Atlantic in January.

With El Niño dissipating, NOAA’s Climate Prediction Center forecasts a 70 percent chance that La Niña— which favors more hurricane activity — will be present during the peak months of hurricane season, August through October.

However, current model predictions show uncertainty as to how strong La Niña and its impacts will be.

Check out this earlier post over at Artemis blog about the potential impact of La Niña.

As we’ve said before, regardless of predictions and outlooks it pays to be prepared and this year’s hurricane season is no different.

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

Hurricane Season: It’s A Wrap

As the 2015 Atlantic hurricane season draws to a close, there’s a lot of talk about how the hurricane forecasters got it right this year, due to a strong El Niño.

Over at the Capital Weather Gang blog, Phil Klotzbach, lead author of the Colorado State University (CSU) hurricane forecasting team, writes that all of the forecasting groups predicted a moderate to strong El Niño event this year, and this turned out to be correct.

Klotzbach observes:

In general, seasonal forecasts did a good job anticipating a below-average Atlantic hurricane season in 2015 due to a strong El Niño event. Most seasonal forecasts predicted a bit less activity than was observed, due to a surprising warming of the tropical Atlantic during the peak of hurricane season this year.”

So what are the key takeaways?

The final tally for the 2015 season was 11 named storms, four hurricanes and two major hurricanes.

No major hurricanes made U.S. landfall in 2015, which means the U.S. has now gone 10 years without a major hurricane landfall. Hurricane Wilma (2005) was the last, according to CSU’s report on the 2015 season.

Still, it’s important to point out that moisture from Hurricane Joaquin–the first Category 4-5 hurricane to impact the Bahamas during October since 1866–contributed to a weather system that led to catastrophic floods across much of South Carolina resulting in more than $2 billion in total economic losses.

The CSU team of Klotzbach and William Gray also reminds us that while the Atlantic has seen a large increase in major hurricanes during the recent period of 1995-2015 (average 3.4 per year) compared with the prior 25-year period of 1970-1994 (average 1.5 per year), the U.S. has been fortunate that few major hurricanes have made U.S. landfall–except during the two very damaging years of 2004-2005.

Consider this lucky statistic:

The Atlantic basin has had 27 major hurricanes since Wilma, with no major hurricane landfalls. The 20th-century average is that approximately 30 percent of all major hurricanes forming in the Atlantic make U.S. landfall.”

Check out I.I.I. facts and statistics on hurricanes here.

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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Infographic on Hurricane Katrina

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:

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Katrina Roundup

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.

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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.

 

Storm Surge: The Trillion Dollar Risk

More than 6.6 million homes on the Atlantic and Gulf coasts are at risk of hurricane-driven storm surge with a total reconstruction cost value (RCV) of nearly $1.5 trillion.

The latest annual analysis from CoreLogic finds that the Atlantic Coast has more than 3.8 million homes at risk of storm surge in 2015 with a total projected reconstruction cost value of $939 billion, while the Gulf Coast has just under 2.8 million homes at risk and nearly $549 billion in potential exposure.

Which states have the highest total number of properties at risk?

Six states–Florida, Louisiana, New York, New Jersey, Texas and Virginia—account for more than three-quarters of all at-risk homes across the United States. Florida has the highest total number of properties at various risk levels (2.5 million), followed by Louisiana (769,272), New York (464,534), New Jersey (446,148), Texas (441, 304) and Virginia (420,052).

But if you rank the states by the highest total projected reconstruction costs in 2015, the top five are: Florida ($491.1 billion), New York ($177.4 billion), Louisiana ($162.1 billion), New Jersey ($126.8 billion) and Virginia ($91.1 billion).

CoreLogic makes the point that even though Louisiana has the second highest number of homes at risk to storm surge in 2015, only one-quarter are in the extreme or very high storm surge category, due in large part to the upgrade and expansion of levees in the state in the 10 years since Hurricane Katrina.

As Dr. Tom Jeffery, senior hazard risk scientist for CoreLogic says:

The number of hurricanes each year is less important than the location of where the next hurricane will come ashore. It only takes one hurricane that pushes storm surge into a major metropolitan area for the damage to tally in the billions of dollars. With new home construction, and any amount of sea-level rise, the number of homes at risk of storm surge damage will continue to increase.”

CoreLogic’s analysis comes as the National Hurricane Center (NHC) debuts experimental storm surge watch and warning graphics for the 2015 hurricane season:

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Storm surge is often the greatest threat to life and property in the event of a hurricane. While most coastal residents can remain in their homes and stay safe from a storm’s winds, evacuations are generally needed to keep people safe from storm surge, the NHC says.

It’s important to note that many properties located outside designated FEMA flood zones are still at risk for storm surge damage.

As CoreLogic reminds us, homeowners who live outside the FEMA flood zones frequently do not carry flood insurance, given that there is no mandate to do so, and therefore may not be aware of the potential risk storm surge poses to their properties.

Data in the full CoreLogic report can be found here.

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

2015 Hurricane Season Opener

By now you’ll have read the latest forecasts calling for a below-average Atlantic hurricane season.

NOAA, Colorado State University’s Tropical Meteorology Project, North Carolina State University, WSI and London-based consortium Tropical Storm Risk all seem to concur in their respective outlooks that the 2015 hurricane season which officially begins June 1 will be well below-norm.

TSR, for example, predicts Atlantic hurricane activity in 2015 will be about 65 percent below the long-term average. Should this forecast verify, TSR noted that it would imply that the active phase for Atlantic hurricane activity which began in 1995 has likely ended.

Still it’s important to note that the forecasts come with the caveat that all predictions are just that, and the likelihood of issuing a precise forecast in late May is at best moderate. In other words, uncertainties remain.

These are wise words.

A recent report by Karen Clark & Co pointed to the rising vulnerability of the U.S. to hurricanes and other coastal hazards because of increasing concentrations of property values along the coast.

Of the $90 trillion in total U.S. property exposure, over $16 trillion is in the first tier of Gulf and Atlantic coastal counties, an increase from $14.5 trillion in 2012, KCC said.

KCC then superimposed 100 year U.S. hurricane events on the 2014 property values in its database. The result was that three regions–Texas, Florida and the Northeast–emerge as the most likely for mega-catastrophes.

In all of these regions, the largest losses from the 100 year hurricanes making landfall near Galveston-Houston, Miami and Western Long Island, are much larger than the 100 year PMLs (Probable Maximum Losses).

As insurance industry execs know, it only takes one hurricane to make landfall for a below-average season to become active and record losses to ensue. Here’s a visual of what the 1992 season–the year of Hurricane Andrew–looked like, courtesy of Weather Underground:

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Hurricane  facts and statistics are available from the I.I.I. here.

I.I.I. Report: Actuarially Sound Rates Key To Residual Property Market

Just in time for the peak of hurricane season, our updated paper on the residual property market is hot off the press.

At first glance the numbers on the property insurance provided by the nation’s FAIR and Beach and Windstorm plans indicate that attempts by certain states to reduce the size of their plans appear to be paying off.

As you’ll see, the exposure value of the residual property market in hurricane-exposed states has declined significantly from the peak levels seen in 2011. In fact between 2011 and 2013, total exposure to loss in the plans fell by almost 30 percent — from $885 billion to $639 billion.

Why such a drop?

Florida Citizens, a plan that accounts for more than half (51 percent) of the total FAIR Plans’ exposure to loss, saw its exposure drop by nearly 50 percent from $429.4 billion in 2012 to $228.9 billion in 2013, as Citizens took much-needed steps to reduce its size.

This accounted for the overall reduction in total exposure under the FAIR plans. In 2013 total exposure to loss in the FAIR Plans was $445.6 billion, a 38 percent drop from its 2011 peak of $715.3 billion.

But what of the Beach and Windstorm plans?

Latest data show that between 2011 and 2013 exposure to loss in the Beach and Windstorm Plans actually grew by 14 percent.

Five state Beach and Windstorm plans are covered in our report: Alabama, Mississippi, North Carolina, South Carolina and Texas.

Over a longer time period, 2005 to 2013, the I.I.I. finds that some of the Beach and Windstorm plans saw accelerating growth. For example, total exposure to loss in the Texas Beach Plan (the Texas Windstorm Insurance Association (TWIA)) increased by 230 percent during this period.

A plan that would move TWIA’s policies over to private insurers and depopulate its book of business (much like Florida Citizens has done) is in the works, but so far nothing definite.

An ongoing and arguably more pressing  concern is the fact that many of the residual market plans charge rates that are not actuarially sound and do not accurately reflect the risk of loss.

What does this mean? The I.I.I. warns that a major hurricane could expose residents in certain states to billions of dollars in post-storm assessments:

While hurricane activity in the most exposed states may have been lower in recent years, there is no question that over the long-term major hurricanes will cause extensive damage in future. This highlights how important it is for the rates charged by these plans to be actuarially sound.”