Tag Archives: Isaac

Isaac and Catastrophe Bonds

As Hurricane Isaac hit the Gulf coast as a Category 1 storm, an interesting tidbit came across the wires regarding state-run property insurer Louisiana Citizens Property Insurance Corp.

In a press release, think tank R Street Institute noted that Pelican Re – a $125 million catastrophe bond issued by Louisiana Citizens – would be triggered if the storm produces more than $200 million in losses for the residual market entity.

If these conditions are met, Isaac would be the first storm ever to trigger a catastrophe bond issued by a state-run insurer.

Over at Artemis blog, there was more discussion:

Pelican Re does not cover pure flood damage so that is in its favour, however we believe storm surge caused by hurricane is covered and wind damage most certainly is. Louisiana Citizens has a great amount of exposure in the coastal areas where hurricane Isaac is currently making the greatest impact. As Pelican Re is an indemnity cat bond it is unlikely we will understand whether there has been an impact for some time as claims come in and losses to Louisiana Citizens are quantified.†

An updated paper on the residual market property plans from the Insurance Information Institute (I.I.I.) notes that a growing number of plans are accessing the capital markets as part of their reinsurance strategy, bolstering their ability to fund losses during hurricane season.

As well as Louisiana Citizens, Florida Citizens also accessed the capital markets in 2012, issuing a $750 million catastrophe bond – making it the largest single peril catastrophe bond in the history of the insurance-linked securities market.

They join a growing list that includes North Carolina’s Beach and Windstorm Plan and the Massachusetts Fair Plan.

For more information on the catastrophe bond market, check out this I.I.I. backgrounder on alternative risk-financing options.

Isaac Prompts Storm Surge Warning

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†¦Ã¢â‚¬ 

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:

Eye On Isaac

Regardless of the exact track of Tropical Storm Isaac the next few days, you can’t help but notice there’s an extremely large band of tropical storm force winds associated with it.

In its 8am EDT advisory on Isaac today, the National Hurricane Center (NHC) reported that Isaac was a little stronger and noted that tropical storm force winds extend outward up to 185 miles (295 km) from its center.

This graphic from the NHC shows the potential reach of those tropical storm force winds:

Florida, Texas, Alabama, Georgia, Louisiana and Mississippi have some significant insured coastal property values, according to the Insurance Information Institute (I.I.I.).

Figures compiled by catastrophe modeler AIR Worldwide show the total value of insured coastal exposure in these six states was $3.8 trillion in 2007. That’s slightly  under half the $8.9 trillion value of insured coastal property in hurricane prone states as a whole.

But it’s not just coastal property that could feel Isaac’s effects. As Hurricane Irene demonstrated last year, the impact of a storm – winds, floods, and rains – can be felt far inland.

A post over at the Disaster Safety Blog (official blog of the Insurance Institute for Business & Home Safety) observes that the 20th anniversary of Hurricane Andrew serves as a reminder that it only takes one storm to cause significant damage.

Even if Isaac doesn’t make hurricane status,  there’s some useful information in I.I.I. hurricane fact files and market share by state.