Category Archives: Hurricanes

Post-Sandy: What You Need to Know

As a resident of Essex County, New Jersey, it’s been a surreal week. Superstorm Sandy caused damage in U.S. East coast communities from Virginia to Maine, but especially in the New York/New Jersey region.

Latest estimates from catastrophe modeler Eqecat put insured losses at up to $20 billion and total economic damage at up to $50 billion.

Eqecat said a number of factors influenced its revised estimates including large electric and utility losses that will trigger significantly more insured losses (business interruption) than were expected.

As my neighbors deal with downed trees, damaged homes, lack of power/heat and food spoilage, I’ve been asked a few questions on insurance coverage.

Here are  my top 3, with reference to the Insurance Information Institute’s (I.I.I.) Hurricane Sandy FAQs:

1. A tree fell on my house or garage, can I file a claim?

The short answer is yes. If a tree hit your home, that damage is covered under your homeowners insurance policy. If your tree fell on your neighbor’s home or garage, his or her insurer would pay for the damage; however, if the felled tree was poorly maintained or diseased and you took no steps to take care of it, their insurer may seek reimbursement from you for the damages. Homeowners insurance policies do not pay for removal of trees or landscaping debris that did no damage to an insured structure.

2. The power went out during the storm and I had to throw out all the spoiled food in the refrigerator and freezer, is this covered?

Following a hurricane, some insurance companies may include food-spoilage coverage, usually for a set amount that can range from $250 to $500 per appliance. Check with your agent or insurance company.

3. Should I still file a claim if I think the damage is less than my deductible?

Yes. Sometimes there may be additional damage that becomes evident in the months following a significant storm. Filing a claim, even if the damage total is under your deductible, will protect you in the event further repairs are needed. And if your home suffers damage from more than one storm in a single season, the damage from the first storm may apply toward the deductible amount.

Sandy Accelerating To Landfall

As Hurricane Sandy makes its final approach towards the New Jersey/New York area with landfall expected this evening, insurers are closely monitoring the storm and ready to respond to the needs of their policyholders.

The Wall Street Journal reports that insurers are assembling rapid-response teams along the Eastern seaboard and preparing to deploy claims specialists into hard-hit communities once the storm passes by.

In its 8am EDT advisory, the National Hurricane Center (NHC) says Sandy is expected to transition into a frontal or wintertime low pressure system prior to landfall:

However†¦This transition will not be accompanied by a weakening of the system†¦and in fact†¦a little strengthening is possible during this process. Sandy is expected to weaken after moving inland.†

See the NHC’s statement about Sandy’s transition to a post-tropical cyclone here.

It’s important to recognize that hurricane-force winds extend outward up to 175 miles from Sandy’s center and tropical-storm-force winds extend outward up to 485 miles, making this a very expansive storm.

Insurers play a vital role in helping individuals and businesses recover from the potentially devastating effects of disaster such as a catastrophic hurricane, according to the Insurance Information Institute (I.I.I.).

Insured catastrophe losses in the United States totaled $35.9 billion in 2011, well above the 2000 to 2010 average of $23.8 billion (in 2011 dollars) according to figures from Munich Re. Thunderstorms, including tornado events, were the costliest type of natural disaster in 2011, based on insured losses (over $25 billion). However, tropical cyclones, which include hurricanes, were the second most costly event category ($5.5 billion in insured losses), with Hurricane Irene accounting for most of the losses ($5 billion, including flood losses covered under the National Flood Insurance Program).

Catastrophe modelers AIR Worldwide and EQECAT are posting regular updates on the storm’s approach and expected damage to the Northeast.

U.S. East Coast Eyes Sandy

As Hurricane Sandy’s #Frankenstorm tag gathers momentum on Twitter, so does the size of the actual storm.

In its 8am EDT outlook, the National Hurricane Center (NHC) noted that tropical storm force winds extend outward up to 275 miles from the center and that Sandy’s wind field is expected to grow in size during the next couple of days.

Sandy is currently a Category one hurricane on the Saffir-Simpson hurricane wind scale, but some weakening is possible during the next day or so, the NHC said.

The current forecast track from the NHC brings Sandy to landfall along the Delaware/New Jersey coastline early Tuesday (see below).

Regardless of the exact track of the storm, these images show the size of the wind and rain event that the U.S. east coast can expect.

 

Check out iii.org for answers to all your  insurance coverage questions.

Sandy Strengthens

A tropical storm watch is now in effect for Southeast Florida and the Upper Keys as Tropical Storm Sandy continues to strengthen and moves towards Jamaica.

In its 8am EDT outlook, the National Hurricane Center (NHC) says Sandy is expected to become a hurricane before it reaches Jamaica and Cuba, later today.

The NHC notes:

Tropical storm conditions are expected to reach Jamaica this morning†¦with hurricane conditions expected by this afternoon. Tropical storm conditions are expected in portions of Haiti by this afternoon. Hurricane conditions are possible in eastern Cuba by this evening. Tropical storm conditions are expected in the central Bahamas by early Thursday†¦and in the northwestern Bahamas by Thursday afternoon.†

It adds:

Tropical storm conditions are possible along the southeast Florida coast†¦the Upper Keys†¦and Florida Bay by Friday morning.†

Jamaica, Haiti and the Bahamas are members of the Caribbean Catastrophe Risk Insurance Facility (CCRIF), a multinational insurance pool developed by the World Bank. Funded by premiums paid by participating countries, the facility provides early payout to members after a major hurricane or earthquake.

Check out I.I.I. hurricane facts+stats.

October Hurricanes

The National Hurricane Center (NHC) has given a tropical system located about 300 miles south of Jamaica a 90 percent chance of becoming a tropical cyclone during the next 48 hours.

In its 8am EDT tropical weather outlook, the NHC said:

Heavy rains from this disturbance are likely to spread over Jamaica†¦Hispaniola†¦and Eastern Cuba during the next several days. These rains could produce life-threatening flash floods and mud slides†¦especially in areas of high terrain.†

A Hurricane Hunter aircraft is scheduled to investigate the system this afternoon.

With six weeks left to the official end of the 2012 Atlantic hurricane season which runs from June 1 to November 30, it’s important to keep an eye on the potential track of “Sandy†.

Here’s a visual of the latest modeled tracks for the system, courtesy of Weather Underground. It’s worth noting that some of the computer models  have “Sandy” approaching the east coast by next weekend:

October hurricanes can be costly.

Remember 2005? Hurricane Wilma today ranks as the fourth most costly hurricane in the U.S., according to the Insurance Information Institute (I.I.I.).

Hurricane Wilma, which made landfall as a Category 3 hurricane down in Florida on October 24, 2005, produced insured losses of $10.3 billion, or $11.7 billion in 2011 dollars.

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.

Historical Hurricanes In Today’s Dollars

Ever wonder how much Hurricane Andrew would cost insurers if it struck today? A timely report from catastrophe risk management and modeling firm Karen Clarke & Co (KCC) has the answer.

According to KCC estimates, Hurricane Andrew would be three times as costly in 2012, causing close to $50 billion in insured losses today, compared to $15.5 billion when it occurred in 1992.

In fact, KCC has mapped out the landfall points of all 28 historical hurricanes that would cause $10 billion or more in insured losses today.

Here they are:

A couple of things jump out from this map and the report.

First, Florida has a target on its back. KCC notes that almost half – 13 out of 28 – of the historical hurricanes causing insured losses of $10 billion or more made landfall in Florida. Florida also has the largest loss – $125 billion from a repeat of the 1926 Great Miami Hurricane.

Another interesting fact from KCC is that there are three historical Northeast hurricanes that would cause $10 billion or larger in insured losses today versus just two in the Southeast.

The  upshot is  that the U.S. is likely to experience a $10 billion or larger insured loss one year out of four on average:

In other words, there’s a 25 percent chance of a $10 billion or larger loss this year. There’s almost a five percent chance of a $50 billion or larger loss.†

Insurance Journal has more on this story.

Here are some additional facts and statistics on hurricanes from the I.I.I.

Flood Insurance Imperative

A raised hurricane season forecast from NOAA and a timely reminder from the Insurance Information Institute (I.I.I.) on flood insurance are our topics du jour.

NOAA’s updated seasonal outlook now anticipates 12 to 17 named storms, up from nine to 15 initially forecast. If you consider that to-date we’ve already seen six named storms, that likely means there’s some significant activity to come during the season’s peak period from August through October.

In NOAA’s words:

We are increasing the likelihood of an above-normal season because storm-conducive wind patterns and warmer-than-normal sea surface temperatures are now in place in the Atlantic. These conditions are linked to the ongoing high activity era for Atlantic hurricanes that began in 1995. Also, strong early-season activity is generally indicative of a more active season.†

While El Nià ±o is a competing factor, NOAA doesn’t expect its influence until later in the season.

Inland flooding from Hurricane Irene and Tropical Storm Lee last year caused significant damage for many home and business owners.

A  timely reminder  from the I.I.I. urges homeowners to consider buying flood insurance. I.I.I. makes the important point that flood insurance covers your property against hurricane-caused storm surges as well as flooding generated by the torrential rains, which often accompanies tropical storms.

Standard homeowners and renters insurance policies do not cover flood damage, but flood coverage, is available in the form of a separate policy both from the National Flood Insurance Program (NFIP), and from a few private insurers.

Earlier this summer, after a series of short-term reauthorizations, Congress passed the Biggert-Waters Flood Insurance Reform Act of 2012 which renews the NFIP for five years.

A Huffington Post piece by Wharton School professors Erwann Michel-Kerjan and Howard Kunreuther discusses the significant reforms to the NFIP as a result of this new law.

Insurance Journal also has a great article by Lori Widmer titled What to Know about the New Flood Insurance Program.