Category Archives: Disaster Preparedness

Hurricane Florence – property losses and insurance implications

Approximately 758,657 homes in North Carolina, South Carolina and Virginia with a reconstruction cost value (RCV) of approximately $170.2 billion are at potential risk of storm surge damage from Hurricane Florence, according to a Corelogic® release.

As we continue to keep a close watch on Hurricane Florence, we’ve put together a list of our content to help understand the insurance implications of storm related property losses.

Hurricane Florence – Home preparedness tips

Hurricane Florence is expected to make landfall along the Southeast or Mid-Atlantic coast as a category 4 storm on September 13.

According to computer model forecasts, Florence will come ashore in Southeast North Carolina, although slight variations could alter the path of the storm that will affect areas of the nation that are far away from the location of its landfall.

A state of emergency has been declared in South Carolina, North Carolina and Virginia in order to mobilize resources to mitigate the effects of the storm. If you are in the path of the storm, plan your evacuation route ahead of time!

Below are just a few steps you can take to protect your home:

  • Cut weak branches and trees that could fall on your house and keep shrubbery trimmed.
  • Hurricane force winds can turn landscaping materials into missiles that can break windows and doors. Much of the property damage associated with hurricanes occurs after the windstorm, when rain enters structures through broken windows, doors, and openings in the roof.
  • If you don’t have storm shutters to protect your windows from breakage, fit plywood panels to your windows, which can be nailed to window frames when a storm approaches.
  • Make sure exterior doors are hurricane-proof and have at least three hinges and a dead bolt lock that is at least one-inch long.
  • Seal outside wall openings such as vents, outdoor electrical outlets, garden hose bibs and locations where cables or pipes go through the wall. Use a high quality urethane-based caulk to prevent water penetration.
  • If you live in a mobile home, make sure you know how to secure it against high winds and be sure to review your mobile home insurance policy.
  • If you have a boat on a trailer, know how to anchor the trailer to the ground or house—and review your boat insurance policy.
  • If you have a swimming pool, lower the water level (additional tips here.)

For more detail on what to do when a hurricane threatens click here.

Lloyd’s City Risk Index: $546 billion at risk from 22 threats

As the world’s population becomes increasingly concentrated in cities, they become more vulnerable to risk events. To understand the risk, Lloyd’s compiled a City Risk Index, detailing the threat landscape for the world’s leading 279 cities.

The index estimates how much economic output (GDP@Risk) a city could potentially lose due to 22 different threats ranging from stock market crash to solar storm.

Here are some highlights from the report:

  • Across all 279 cities, $546.50 billion is at risk from all 22 threats.
  • Man-made threats account for 59 percent of the total GDP@Risk – with market crash the largest single threat, with cities exposed to losses of $103.33 billion on an annual basis.
  • The 10 cities with the highest exposure have a combined $126.82 billion of GDP@Risk, almost a quarter of the global total, with Tokyo standing to lose more than any other city.
  • Climate-related risks account for $122.98 billion of GDP under threat, and this sum will grow as extreme weather events grow in frequency and severity.
  • If cities were to improve their resilience, global GDP exposure to loss would drop by $73.4 billion.

CoreLogic: 6.9 million homes worth over $1 trillion at risk for storm surge in 2018

Weather experts, including I.I.I. non-resident scholar, Dr. Phil Klotzbach, are predicting a slightly below average hurricane season for 2018, but that does not mean that the dangers of potential storm damage are negligible.

CoreLogic, an analytics company, released its annual Storm Surge report on June 5. The report found that along the Gulf and Atlantic Coasts, about 6.9 million coastal homes worth over $1 trillion are at risk. CoreLogic estimates reconstruction costs for 2018 increased 6.6 percent from a year ago, mirroring increased regional construction, equipment, and labor costs.

The Atlantic Coast has more than 3.9 million homes at risk of storm surge with reconstruction cost value of more than $1 trillion, up by about $30 billion from 2017. Gulf Coast homes with the same risk total more than 3 million, with more than $609 billion in potential exposure to total destruction damage, a $16 billion increase compared to 2017.

The reconstruction cost value is calculated based on 100 percent destruction of the residential structure, using the combined cost of construction materials, equipment and labor costs.

The Ellicott City Flood: Rebuilding Begins with Resilience

By Sean Kevelighan, CEO, Insurance Information Institute

On May 27, for the second time in three years, Ellicott City, Maryland was ravaged by what meteorologists term a “1,000-year flood”—this while some businesses were still celebrating the one-year anniversary of their reopening after the August 2016 catastrophe.

As affected households and businesses assess the damage and pledge to rebuild (or to relocate) after this deadly event, one fact looms largest: that 1,000- or 100-year floods now seem to strike with numbing regularity. The time has come, then, for communities and individuals to accept this paradigm shift by embracing resilience.

Local, state and federal governments have a wide range of tools at their disposal to effectuate resilience, including public policy solutions and rebuilding/retooling critical infrastructure to withstand greater stresses. However, for business owners, homeowners, and renters, the most important step they can take is to close the “coverage gaps” that expose them to massive uninsured losses that can delay or prevent recovery. And for regulators and insurers, this creates an excellent opportunity for public/private solutions to meet this growing challenge head-on.

Ebola outbreak in the Congo may be eligible for pandemic catastrophe bonds

The unfolding outbreak of the Ebola virus in the Democratic Republic of Congo may activate pandemic catastrophe bonds, said a recent Artemis blog post.

Last year, the World Bank launched a “pandemic bond” to support the Pandemic Emergency Financing Facility (PEF). The cat bonds are designed to payout when an outbreak gets to a stage where emergency aid financing would be required, enabling the mobilization of capital rapidly to help prevent further spread of any eligible disease outbreak.

Pandemic cat bond notes cover a range of pandemic perils including, Coronavirus, Crimean Congo Hemorrhagic Fever, Filovirus, Lassa Fever and Rift Valley Fever, with Ebola falling within the Filovirus category.

The current Ebola outbreak appears to be an eligible event under the terms of the transaction, although it’s probably too early for a formal announcement. The number of confirmed deaths remains well below the trigger point which can only begin to payout for a Filovirus like Ebola once the confirmed deaths pass 250.

Pandemics are one of the most certain uninsured risks in the world today, according to the World Bank site. There’s a high probability that the world will experience a severe outbreak in the next 10 to 15 years that could destabilize societies and economies. The annual global cost of moderately severe to severe pandemics is roughly $570 billion, or 0.7 percent of global income. The cost of a severe pandemic like the 1918 Spanish flu could total as much as 5 percent of global GDP.

What are the odds? Pretty good. . .

New York Times columnist David Leonhardt discusses how people think about probability:

People understand that if they roll a die 100 times, they will get some 1’s. But when they see a probability for one event, they tend to think: Is this going to happen or not?

They then effectively round to 0 or to 100 percent. . . . It’s . . . what many Americans did when they heard Hillary Clinton had a 72 percent or 85 percent chance of winning. It’s what football fans did in the Super Bowl when the Atlanta Falcons had a 99 percent chance of victory.

If you tell someone a thing is unlikely, they will tend to think it is impossible. When the unlikely happens, they are more likely to blame you (or your mathematical model) than their leap of logic.

In insurance, we hear about it when a flood encroaches a 500-year floodplain or a 1-in-250 year storm hits.

It is one of the biggest challenges we face in helping to create a more resilient world – convincing people that what is unlikely today is inevitable someday.

 

The challenges to building better after a disaster

The pressures to rebuild quickly after a disaster can pose a challenge to the notion that immediately after a disaster is the perfect opportunity for creating more disaster resilient buildings and infrastructure.

The author of this blog, Robert Muir-Wood, chief research officer for RMS, cites several recent examples – “Whether this is to elevate buildings out of the flood zone in Houston or raising wind design code standards in Dominica, the political instinct will be to remove any barrier in the path of rapid reconstruction.”

He concludes that we should try harder to argue for making the transformation at the time of the disaster and not give in to the political arguments where economic recovery is the number one priority.

 

Texas braces for Hurricane Harvey

As Texas prepares for the imminent arrival of intensifying Hurricane Harvey, already a Category 2 storm, latest analysis shows the enormous potential values at stake.

Just in from CoreLogic: More than 200,000 homes in Texas have the potential for storm surge damage with an estimated total reconstruction cost value (RCV) of almost $40 billion.

Houston, Texas ranks number 7 among the top 15 metropolitan areas for storm surge risk, with a potential 283,380 at-risk homes and an RCV of $53.4 billion.

But don’t forget the potential impact of strong hurricane-force winds.

Earlier from AIR Worldwide: The insured value of residential and commercial properties in coastal areas of Texas totaled $1.2 trillion in 2012, accounting for 26 percent of the state’s total insured property exposure.

The Texas Windstorm Insurance Association (TWIA), is the state’s insurer of last resort for wind and hail coverage for Texas Gulf Coast residential and commercial property owners in the event of catastrophic loss. TWIA covers wind and hail in 14 coastal counties and parts of Harris County. TWIA has initiated its catastrophe plan.

Insurers stand ready to assist all policyholders impacted by Harvey.

“London Calling…”

I.I.I.’s James Ballot, Senior Director of Marketing and Content Strategy, contributes these highlights from the IIS Global Forum 2017.

Established millennia ago and since visited continually by perils ranging from fire, flood, pestilence, civil unrest and wave upon wave of attacking foreign enemies, it’s no great stretch to call London the de-facto global headquarters of resilience. So it’s fitting that London should host this year’s International Insurance Society’s (IIS) Global Insurance Forum (GIF), given that the event’s focus was set squarely on Global Resilience and the Role of Insurance.

At the Forum more than 500 delegates and other attendees gathered to set a truly global agenda for how insurance and other parties–NGOs, policymakers, businesses, educational institutions, the media, among others—will respond to challenges ranging from political instability to cyberthreats to the need to create the right talent infrastructure to master the technological changes presently shaping our industry to innovating ways to address threats posed by intensifying natural catastrophe cycles.

Among the highlights:

  • A video address from HRH The Prince of Wales to open the Day 3 Insurance Development Forum (IDF) in which he outlines four key areas where insurance can assume leadership in fostering resilience.
  • Wide-ranging discussions of the “insurance gap” and how narrowing it is essential to building financial resilience against cyberattacks, as well as mitigating uninsured natural catastrophe losses among vulnerable populations in developing nations.
  • The Nature Conservancy, a top-line partner at this year’s GIF, introduced an innovative insurance product underwritten by Swiss Re that insures coral reefs and other natural coastal fortifications.
  • Insurtech and emerging innovations are changing the business—mostly by creating a climate in which, as one insurance fund capital manager asserted, insurance and tech startups can partner to help make “yesterday’s risks insurable today.”

A lot to cover in a single posting, to be sure. For a deeper dive into the goings-on at IIS Global Forum, Asia Insurance Review (AIR) offers gavel-to-gavel coverage of the event, as well as valuable insights from Forum participants.