Tag Archives: Hurricane Irma

Why insured loss numbers for the “HIM” hurricanes are delayed

Port Arthur, Texas after Hurricane Harvey

Hurricane Harvey hit Texas in August 2017. Just weeks later, Irma made landfall in Florida, followed by Maria in Puerto Rico. The so-called “HIM” storms struck the U.S. 16 months ago, but final insured loss numbers have yet to be finalized.  Why?

There are at least two reasons: the storms happened in rapid succession, wreaking havoc on the claims settlement process; and the storms caused significant business interruption losses, which can take time to settle.

The storms happened in rapid succession. Three major hurricanes hit the U.S. within a month of each other. This put a serious strain on insurers’ ability to adjust losses – basically, investigating and settling claims. There weren’t enough local adjusters, so others had to be brought in from other states. But despite the reinforcements, there weren’t always enough adjusters to go around as storm followed storm. Claim reports were therefore delayed and the expenses for adjusting losses increased. (Similar issues cropped up during the 2005 season, when hurricanes Katrina and Rita hit Louisiana only three weeks apart.)

This problem was especially acute in Puerto Rico after Hurricane Maria. As the Property Claims Services (PCS) unit of ISO noted, loss adjusters and contractors had to be flown in from the mainland – but not nearly enough of them were available, since many were still working on damage from Harvey and Irma. Fewer adjusters and contractors meant that, in many cases, only emergency repairs could be completed. As these temporary repairs deteriorated, buildings were further damaged, and more repair payments had to be made. Additionally, PCS noted that mainland adjusters may have been unfamiliar with the insurance policies typical in Puerto Rico, leading to insurers having to reopen some claims.

Claims were also reopened in Florida after Hurricane Irma, but for different reasons. In April 2018 Florida’s Citizens Property Insurance Corp. announced that it had reopened about 37 percent of its Irma-related claims since the storm. Citizens stated that many claims required additional payments or needed more information.

A high volume of reopened claims could be due to insurers paying out losses too quickly. Some have argued that insurers in Florida had acted so quickly in an attempt to avoid dealing with assignment of benefits (AOB) claims. (Check out the I.I.I.’s recent report on Florida’s AOB crisis for more information.) Several insurers have noted that insured losses for Irma continue to rise because of AOB claims, reopened claims, and higher adjustment expenses.

Business interruption issues continue. “Business interruption” usually includes losses that result from a business’s lost revenue and increased expenses caused by property damage following a hurricane. Sometimes these policies will also cover losses from utility outages. Depending on how severe the damage is, business interruption claims can be quite large – and they can take a long time to settle.

Consider Puerto Rico: Unfortunately, Hurricane Maria slammed the island’s fragile infrastructure and energy grid. The pharmaceutical industry, which has a large manufacturing footprint on the island, was particularly affected. The commissioner of the U.S. Food and Drug Administration (FDA) noted at the time that damaged factories weren’t nearly as big a problem as an unstable electric grid. There were shortages of some drugs and medical devices for months after Maria struck.

Because of these issues, we can’t expect the final insured losses for the HIM storms until maybe mid-2019, almost two years after the fact.

THE WEEK IN A MINUTE, 10/19/17

The III’s Michael Barry briefs our membership every week on key insurance related stories. Here are some highlights:

Disaster Relief: Preparing for Fraudsters

By I.I.I. staffer Brent Carris

While natural disasters have the unique ability to unify people, it is important to stay cognizant of scams and fraud that follow.

PropertyCasualty360 addressed potential scams in this article, noting that hurricane relief fraudsters are some of the first to appear after a storm. One way to avoid scams is to donate strictly to well-known reputable organizations such as the Red Cross or Direct Relief.  The Insurance Industry Charitable Foundation has a Hurricane Harvey disaster relief fund as well.

Affected homeowners should be wary of who they let into their home for repairs. Regulators in Florida are warning consumers not to sign Assignment of Benefits (AOB) forms to get repair work started.

FEMA has launched this page with information on disaster relief and how affected individuals can prepare for the arising fraudsters.

 

Concurrent Causation and Hurricane Irma claims

The issue of causation, especially when there may be multiple causes of loss, can be a tricky one for both insureds and insurers. It comes down to what caused the loss – and in what order.

Take the example of a major catastrophe, like a hurricane, where there may be property claims arising from both wind and water. Determining the cause of loss is key to determining whether there is coverage under the terms of an insurance policy because there are two policies in play, one for wind damage and one for flood damage.

Some jurisdictions subscribe to the “efficient proximate cause doctrine” while others subscribe to the “concurrent causation doctrine”.

What’s that?

The efficient proximate cause doctrine finds that where there is a concurrence of different perils, the efficient cause – the one that set the other in motion – is the cause to which the loss should be attributed.

Under the concurrent causation doctrine, when multiple perils contribute to a loss, coverage is allowed if at least one cause of the loss is covered by the policy.

In the case of Florida, a recent court decision adopted the concurrent causation doctrine, which will impact Hurricane Irma claims.

Insurance and disaster aid for non-U.S. citizens

Our Communications department has received questions from Canadian news outlets on behalf of Canadian citizens who own homes in areas affected by either Hurricane Harvey or Irma. Here are some of their questions and the answers we found.  Of course, the answers below also apply to other non-citizens who own property in the U.S.

Q: Can Canadians qualify for a Federal Emergency Management Agency (FEMA) grant?

A:  It depends. To be eligible for assistance from FEMA, at least one person in the household must be a U.S. citizen, Qualified Alien or noncitizen national with a U.S. Social Security number.

Q: Can Canadians purchase a FEMA National Flood Insurance Program (NFIP) policy?

A: Yes. Anyone who owns property in the U.S. can buy a FEMA NFIP policy as long as their property is in a participating NFIP community. They should be able to buy excess flood coverage if the event they want policy limits above a beyond what FEMA’s NFIP offers ($250,000 for dwelling protection, and $100,000 for the dwelling’s contents).

Q: Can Canadians purchase a policy from Florida’s Citizens Property Insurance Corp.?

A: Yes, it appears. We found no restrictions on the citizenship of the buyer. To find out more about Florida Citizens’ eligibility requirements click here.

Hurricane Irma Loss Estimates, 9/13/17

We’ve chronicled loss estimates from Harvey. Here we’ll do the same for Irma.

Karen Clark

As of 6 p.m. 9/13, Karen Clark estimates :

  • Total insured loss of $25 billion, being
    • $18 billion in the United States, mainly Florida but also Georgia, South Carolina and Alabama.
    • $7 billion through the Caribbean.

Business Insurance notes:

Estimates include losses to buildings, other insured structures, contents, business interruption and autos, but do not include crops or losses covered by the National Flood Insurance Program.

RMS

As of 2:30 p.m. 9/10, RMS estimates:

  • 10 percent chance that wind losses will exceed $60 billion. (This estimate has been falling the past couple of days, as the storm has tracked away from the Miami/Fort Lauderdale/Palm Beach corridor.)
  • This doesn’t include:
    • Post-event amplification (demand surge), which could add as much as another 15 percent, depending on how the storm plays out.
    • Storm surge, which could add another 30 percent.
AIR

As of 5 p.m. 9/10, via press release:

  • Total US Insured Losses: $20 billion to $40 billion.
  • This estimate did not include any mention of insured losses in the Caribbean, which were estimated between $5 billion to $15 billion, according information in a prior AIR release.
  • Here at I.I.I., we’ll note that a $20 billion loss would make the storm one of the three worst insured catastrophes in U.S. history, even after accounting for inflation.

As of 3 p.m. 9/9, via CNBC:

  • Total Insured Losses: $20 billion to $65 billion.
  • U.S. Insured Losses $15 billion to $50 billion

Hurricane Irma Likely to Make Landfall in Florida or the Southeast U.S.; Devastating Winds and Storm Surge Expected

Hurricane Irma tore through the Caribbean on September 6th and 7th leaving destruction in its wake. At least seven fatalities were reported as well as 95 percent of St. Martin destroyed and 70 percent of Puerto Rico’s households without power. The storm is headed towards Turks and Caicos and Haiti.

Florida Gov. Rick Scott urged all Florida residents to be prepared to evacuate with the National Hurricane Center  warning the storm could reach South Florida by Sunday.

The Insurance Information Institute (I.I.I.) has issued this press release today urging anyone in the path of the storm to make  safety their first priority. The I.I.I. recommends that Floridians recall the lessons from Hurricane Andrew in 1992 and Wilma in 2005. Not only can high winds be deadly; storm surge is also a serious threat to human life. Residents near coastal areas and inland bodies of water should have a plan for evacuating from flood-prone areas—and be ready to put that plan into action. The release contains many useful disaster preparedness tips.

Historical Perspective: How Does 2017 Atlantic Hurricane Season Compare to Most Active Past Seasons?

Phil Klotzbach, lead author of the Colorado State University (CSU) hurricane forecasting team, and I.I.I. non-resident scholar delivers this perspective.

After a relatively mild start, the 2017 Atlantic hurricane season has become drastically more active over the past couple of weeks. Hurricane Harvey made landfall in Texas as a Category 4 hurricane, bringing devastating rains to the Houston metropolitan area, causing at least 70 fatalities and economic losses estimated as high as $108 billion.  Following hot on its heels, Hurricane Irma developed off of Cabo Verde and has intensified into a devastating Category 5 hurricane.  Irma has wreaked death and devastation across the northern Leeward Islands, and after brushing the northern coast of by Puerto Rico, the cyclone is tracking across the Turks and Caicos, the Bahamas, and appears headed toward Florida and the southeast United States.  While landfall of a major (Category 3+ on the Saffir-Simpson Wind Scale – maximum sustained winds of 111 mph or greater) hurricane in the United States seems likely at this point, it is important to realize that other years in the recent past brought major storms in rapid succession.

During the 2004 Atlantic hurricane season, a total of five hurricanes made landfall (Charley, Frances, Gaston, Ivan and Jeanne), with four significantly impacting the state of Florida.  Prior to Harvey’s landfall, Charley was the last Category 4 hurricane to make landfall, doing so in SW Florida.  Both Frances and Jeanne made landfall near Stuart, FL as a Category 2 and Category 3 hurricane, respectively.  Ivan made landfall near Mobile, AL and brought significant storm surge and wind damage to both Alabama and the Florida Peninsula.  Total economic losses from that year are estimated at $71 billion.


Hot on the heels of the 2004 season, the 2005 Atlantic hurricane season had the most named storms (28) and hurricanes (15) on record.  It also had five landfalling hurricanes, including four major landfalling hurricanes (Dennis, Katrina, Rita, and Wilma).  Dennis made landfall on the Florida panhandle causing considerable damage there, while Katrina was a large Category 3 hurricane that caused intensive surge and wind-related destruction along the Mississippi coastline as well as triggering the levee failure that caused massive flooding in New Orleans.  More than 1,500 fatalities occurred in Katrina.  Rita made landfall several weeks later in SW Louisiana, also causing significant surge and wind-related damage.  Then Wilma rounded out the season, becoming the strongest storm on record in the Atlantic (as measured by central pressure); making landfall as a Category 3 hurricane in SW Florida.  All told, the season caused $208 billion in damage.


While the 2017 Atlantic hurricane season has been devastating already, and continued destruction with Irma looks likely, the two recent years of 2004 and 2005 were also incredibly deadly and destructive.  The United States has enjoyed a great string of luck since 2005, with NO major (Category 3 or greater) hurricane landfalls. Harvey, of course, brought that streak to an end.  Unfortunately, it looks like we may have another very significant United States landfall hot on Harvey’s heels.

The Get-Ready Checklist

There are many useful tips for preparing for a disaster, but what do you do when one is bearing down upon you and you only have a few days or even hours to prepare? Here is a list of tips we’ve assembled:

If you remain at home

If you don’t need to relocate, stay indoors. Don’t go out during the brief calm when the eye of the storm passes over. Wind speeds can increase dramatically in seconds.

  • Stay away from windows and glass doors and move furniture away from exposed doors and windows.
  • Stay on the downwind side of house. If your home has an “inside” room, stay there during the height of the hurricane.
  • Keep the radio or television tuned for information from official sources.
  • Without taking any unnecessary risks, protect your property from damage. Making temporary repairs can reduce your losses.
  • Line the bathtub with plastic sheeting or a clean shower curtain, or caulk the drain with silicone caulking — it holds water for weeks and cleans up easily when dry. Plan on three gallons per person, per day for all uses (including flushing the toilet).

 Prepare an evacuation plan

In an emergency you may have only a few minutes to gather your important papers and leave your home, possibly for good. Have the following ready to go:

  • Medicines, prescriptions, comfort items and a change of clothes.
  • Emergency supplies such as flashlights, radio, batteries and water.
  • Computer hard drive or laptop.
  • Insurance policies; birth and marriage certificates; wills; deeds; financial information such as account numbers, recent tax returns, stocks, bonds and other negotiable certificates; driver’s licenses and other personal identification.
  • Take warm, protective clothing and remember to lock windows and doors.

After the hurricane, dangers remain!

The storm may have passed, but new dangers lurk.

  • Beware of outdoor hazards. Keep away from loose or dangling power lines, and report them immediately to the proper authority.
  • Walk or drive cautiously, washouts may weaken road and bridge structures.
  • In the event of a power outage, throw out food that may be spoiled. Boil municipal water before drinking until you have been told it is safe.

Additional resources:

Hurricane Awareness

Preparing For A Hurricane

Making Your Home More Hurricane Resistant: Five Steps 

Infographic: This Hurricane Season, Lock in Peace of Mind

The Florida Sun Sentinel Hurricane Guide

Harvey vs. Irma: Every Hurricane is Different

Hurricane Irma begins its assault, while Texas and Louisiana begin the long road to recovery from Hurricane Harvey.

No one, of course, knows exactly what damage Irma will unleash, but it is likely to be quite different from what Harvey wrought. That’s because no two storms are alike.

Business Insider touches on the differences:

While Harvey’s record rains drenched southeastern Texas and western Louisiana, flooding Houston in over 4 feet of rainfall, Irma’s winds — if they stay as strong as they were on Tuesday evening — could flatten buildings, trees, and power lines on the Caribbean islands it’s threatening to devour.

At its peak, Harvey was a Category 4 hurricane on the Saffir-Simpson scale, but its weakened winds downgraded it to a tropical storm the day after it made landfall. Irma, meanwhile, is a Category 5 monster that’s already one of the strongest Atlantic hurricanes ever recorded — and it’s still strengthening.

Meanwhile, Live Science laments the problems with shoehorning all the complexities of a hurricane into a single number, like Category 5.

As a Category 4 storm, Harvey’s winds meaning landfall blew between 130 and 156 mph. But catastrophe modeling firm RMS said the storm packed only one-fifth the total energy of Hurricane Ike, a Category 2 storm that struck the same area in 2008.

Harvey became an enormous flood because the storm lost almost all its forward momentum upon reaching land.

Meanwhile Irma is among the most powerful storms ever to cross the Atlantic, but doesn’t threaten a Harvey-like deluge. It is delivering, however, bark-shredding winds that will cause catastrophic damage.

Both storms, though, are tragedies.

Harvey survivors can learn more about filing flood insurance claims here. They can learn about filing other insurance claims here. For other types of federal disaster assistance, click here.

If you are bracing yourself for Irma, FEMA has advice here.