Category Archives: Flood Insurance

Mississippi Flood Insurance Purchases Low, Despite Wetter Rainy Seasons – And They’re Not Alone

Getty images

Hundreds of homes and businesses were damaged by flooding, as heavy rains inundated Jackson, Mississippi over the Presidents Day weekend, pushing the Pearl River to its third-highest crest ever.

“If these heavier rainfall events increase in frequency, our rivers and streams are going to be responding in line too,” said Suzanne Van Cooten, hydrologist in charge of the National Weather Service’s Lower Mississippi River Forecast Center to the Wall Street Journal.

Federal data show last year was the second wettest on record across the continental U.S., and Mississippi’s river communities are keeping an eye on forecasts after an unusually early start to the 2020 spring flood season following a soggy 2019.

Yet flood insurance take-up rates remain low. “The alarming truth is that entirely too many Americans could protect themselves with flood insurance, but simply don’t know the extreme risk of devastation they are facing, or even worse, they are deciding to take their chances and ignore it, said Sean Kevelighan, Triple-I CEO.  “Triple-I’s recent analysis of National Flood Insurance Program’s (NFIP) data which is now illustrated in an interactive map of Mississippi counties along the Pearl River show some counties’ flood insurance take-up rates are as low as .01 percent. In other words, as much as 99.9 percent of people living in an active flood prone area are without any protection or recovery method. The intent of sharing this information is to encourage Americans to take more action to protect themselves by identifying the right insurance coverage, coupled with taking recommended precautionary measures, all of which are proven to dramatically boost their ability to recover from disaster.”

“Unacceptably low”

Flooding is the most common and costly natural disaster in the U.S., causing billions in economic losses each year.  According to the National Flood Insurance Program (NFIP), 90 percent of natural disasters in the U.S. involve flooding.  Flood damage is excluded under standard homeowners and renters insurance policies, but, flood coverage is available as a separate policy from the NFIP and from some private insurers.

Flood insurance was long considered an untouchable risk by private insurers because they didn’t have a reliable way to measure the risk. In recent years, however, modeling firms are getting better at assessing flood risk, and insurers have become more comfortable underwriting it.

Triple-I’s 2018 Pulse survey found 15 percent of U.S. homeowners had flood insurance, up from 12 percent who had the coverage in 2016. A McKinsey & Co. analysis found that as many as 80 percent of Texas, 60 percent of Florida, and 99 percent of Puerto Rico homeowners lacked flood insurance. Munich Re has called flood insurance take-up rates “unacceptably low.”

Reasons often cited for lack of coverage is that it is too expensive, that homeowners are not aware they don’t have it, and that people underestimate the risk of flooding.

At Triple-I’s 2020 Joint Industry Forum, FEMA Deputy Administrator for Resilience Dan Kaniewski and Weather Channel Hurricane expert  Dr. Rick Knabb, talked emphatically about the need for flood insurance – even where banks don’t require it to provide mortgages.

“When we at FEMA talk about ‘resilience,’” Kaniewski said, “we mean preparedness. We mean mitigation. We mean insurance. Insurance is the best resilience tool.”

Knabb agreed, calling upon meteorologists around the world to “talk about insurance more.” He also called on insurance agents to discuss flood coverage for their customers who aren’t in flood zones.

“If it can rain where you live,” he said, “it can flood where you live.”

Triple-I’s insurance for resilience project

In this video, Sean Kevelighan, CEO of the Insurance Information Institute (Triple-I), talks about the Triple-I’s Resilience Hub that the organization began developing in 2019 in partnership with Aon and the Colorado State University Department of Atmospheric Science.

The Hub’s goal is to use data in a way that helps people visualize and understand the risk of natural catastrophes with which they are living as catastrophes become more severe and more people move into high-risk areas.

“We’re tracking hurricane paths all the way back to 1990 so that when we forecast with those relative years, people can better understand what the impact might be in today’s economy,” said Kevelighan.

The project also tracks public flood insurance take-up rates through the National Flood Insurance Program. The average take-up rate for flood insurance is only 12 percent for the nation.

The Hub is part of the Triple-I’s overall insurance for resilience project, which aims to build a coalition that includes government agencies such as FEMA, private sector stakeholders such as Aon, and academic institutions such as the Wharton Risk Center to maximize impact. The Hub’s goal is to provide in one location easy-to-use content to empower consumers to make data-driven decisions when it comes to managing their exposure to extreme weather events.  “What we want to drive in the long run is behavioral change. We want people to think twice about where they are living and how they’re living so that they can be more resilient.”

House approves TRIA, NFIP extensions as part of $1.4 trillion spending package

On Tuesday, December 17, the House approved a package of bills that includes a seven-year reauthorization of the Terrorism Risk Insurance Act (TRIA) and funding for the National Flood Insurance Program until September 30, 2020.

Numerous insurance industry groups applauded the extension of TRIA. The act has been an important support in the effort to supply terrorism insurance through the private market. Since it was enacted, the percentage of companies purchasing terrorism insurance has risen to 80 percent, and the price of coverage has fallen more than 80 percent.

The $1.4 trillion spending package also includes:

  • Federal funding ($25 million) for gun violence research for the first time in 20 years.
  • A repeal of Obamacare taxes, including a 2.3 percent excise tax on medical devices, a health insurance industry fee that would have taken effect in 2020, and the 40 percent “Cadillac” excise tax on the most expensive health-insurance plans.
  • The Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019, which features provisions that make it easier for smaller employers to join open multiple-employer plans, ease non-discrimination rules for frozen defined benefit plans, and add a safe harbor for selecting lifetime income providers in defined contribution plans.

The bill is expected to pass the Senate and be signed by President Trump before government funding expires on December 20.

FEMA publishes flood insurance claim records going back to 1978

“New York City, USA – October 31, 2012: In the aftermath of Hurricane Sandy the Battery Park Underpass is seen completely flooded along the West Street entrance looking north in Lower Manhattan.”

On June 11 the Federal Emergency Management Agency (FEMA) published data covering more than 2 million flood insurance claim records going back to 1978 on its OpenFEMA website. This is a giant leap toward helping scientists, policy-makers, and the public understand how the National Flood Insurance Program (NFIP) works, where flood damage occurs, and what the costs are to the nation.

“This data demonstrates FEMA’s commitment to build a culture of preparedness by providing insights to our stakeholders that can help close the nation’s insurance gap,” said Dr. Daniel Kaniewski, FEMA’s Deputy Administrator for Resilience, in a news release. That gap is quite sizable: FEMA estimates that only 3 percent of homeowners have flood insurance.

Private insurers, who have been carefully getting back into covering flooding in recent years should be able to use the data to grow in the flood insurance space. “The private market will now be able to identify areas with prior flood claims and historical flood insurance policies,” said David Maurstad, FEMA’s Deputy Associate Administrator for Insurance and Mitigation.

As useful as these data could be, the dataset does not include the exact addresses of affected buildings, to protect policyholders’ privacy. It does include ZIP code-level data on where policyholders received payments. A home buyer might not be able to learn the full history of flood risk for a property, as this South Carolina Post and Courier article points out.

However, the published data do enable analysis of how coverage has changed in a geographic area, and where NFIP claims have been filed for more than 40 years. Information such as: state, census tract, ZIP code, year of loss, and amount paid on claims are included. The dataset will be updated every 45 to 60 days and delivers the most specific amount of geographic data possible.

The Natural Resources Defense Council (NRDC) has already used the data to create this animation showing the location of every NFIP claim in the contiguous United States, from 1970 through 2018.

The I.I.I. has more insights about flood insurance here.

I.I.I. and the Weather Channel get the word out about flood insurance

How to Get Flood Insurance

Only 12 percent of Americans have flood insurance but many more will need it in a severe weather event. Learn more at iii.org about how they are helping homeowners and renters to obtain it.

Posted by The Weather Channel on Thursday, March 7, 2019

 

To make sure that homeowners are aware of the importance of flood insurance, the I.I.I. recently partnered with the Weather Channel.

A video posted to the Weather Channel’s Facebook page demonstrates just how destructive flooding can be; for example, in the video you can see the devastation from Hurricane Sandy wreaked on Breezy Point, a coastal community in Queens NY.

“What’s remarkable about flood insurance is that only 12 percent of people have it,” says Sean Kevelighan, I.I.I.’s CEO. One misconception that people have about flood insurance is that it’s included in a homeowners policy. But that’s not the case. A separate flood policy must be obtained. Flood insurance is mostly sold by FEMA’s National Flood Insurance Program, but some private insurers have begun offering it as well.

For those savvy enough to have purchased the coverage, it made a world of difference. “If we did not have flood insurance we would have been completely dependent on [government assistance]. It would never have been enough to fix out house”, says one resident of Breezy Point.

The video has garnered over a thousand views so far. We hope it leads to more people getting this invaluable protection.  For more information about flood insurance click here.

You need flood insurance: “ice jam” edition

like space jam, but with ice

So you live in Wisconsin, far away from any hurricanes and ocean storm surges. You don’t need flood insurance, right?

Wrong. The big thaw spreading across the Midwest is a perfect lesson for why you do, in fact, need flood insurance.

The Wall Street Journal reported that in Lone Rock, Wisconsin, temperatures rose 80 degrees in three days, from minus 39 to 41. That kind of temperature swing is a recipe for floods.

Most obviously, melting ice and snow can swell rivers. But especially worrisome are “ice jams,” which form when frozen rivers melt into large ice chunks that can lodge together and block the river’s flow. In the worst cases, these artificial dams cause serious flooding in the area around the river.

This happened last year in Vermont and upstate New York when a rapid thaw followed a deep freeze. In Swanton, Vermont an ice jam on the Missisquoi river flooded a state highway for over a mile and inundated several homes, forcing many to evacuate.

Here’s the bad news: standard homeowners insurance policies don’t cover flood damage. If you don’t have flood insurance for your home, you probably aren’t covered under your homeowners or renters policies because flood risks used to be considered uninsurable.

To address this lack of coverage, the National Flood Insurance Program (NFIP) was created back in the 1960s. The NFIP is a federal program that provides flood insurance to participating communities. If your community participates in the program, you can often purchase insurance through a private insurer that handles policies and claims on behalf of the NFIP.

Private insurers have also recently begun offering flood insurance outside of the NFIP, as new modeling techniques have helped them get a better handle on the risks and costs.

Flood insurance will usually cover physical losses to your home caused by floods or flood-related events, like erosion – with some limitations (trees and fences aren’t covered, for example). You can also buy coverage for the contents inside your home, making flood insurance a crucial tool to help you get back on your feet.

Make sure to talk to your insurance agent about the right flood policy for you. Yes, even you Wisconsinites out there.

The 2018 Hurricane Season: A Retrospective

Hurricane Michael

The 2018 hurricane season officially ended on November 30. The National Oceanic and Atmospheric Administration’s (NOAA) storm counts for the season were: 15 named storms, including eight hurricanes. Two of these were “major” hurricanes (Category 3, 4 or 5).

To put that into perspective, the average hurricane season has 12 named storms, including six hurricanes, of which three are major. That makes 2018 a little worse than a “normal” year, and well within NOAA’s predictions before the start of the season on June 1.

Fortunately, these numbers are down from the especially destructive 2017 season, which included the so-called “HIM” storms (Harvey, Irma, and Maria). In 2017 there were 17 named storms, including 10 hurricanes, of which six were major.

But that is little comfort to the people affected by the two major hurricanes, Florence and Michael.

Hurricane Florence: Florence reached Category 4 status on September 10, making landfall on September 14 in North Carolina as a Category 1. Because the storm moved very slowly, Florence dumped at least 30 inches of rain in parts of North Carolina, setting a record in the state for rain from a hurricane.

Catastrophe modelers have estimated that insured losses from Hurricane Florence could range from $2.5 billion to $5.0 billion, excluding National Flood Insurance Program losses. Worryingly, it’s been estimated that somewhere between 70 percent and 85 percent of flood losses are uninsured (get flood insurance, everybody).

Hurricane Michael: Michael became a strong Category 4 storm on October 10 and made landfall shortly afterward in the Florida panhandle. The storm registered wind speeds just under Category 5-level speeds, making Michael perhaps the strongest hurricane to ever hit the Florida panhandle.

Catastrophe modelers estimated that insured losses from Hurricane Michael could range from $6 billion to $10 billion.

(The loss numbers for both hurricanes are subject to change, since losses are still being adjusted and paid out.)

In comparison, the Property Claims Services (PCS) unit of ISO estimates that insured losses from Hurricane Harvey will top $14 billion. PCS estimates that insured losses from Hurricane Irma will be more than $20 billion.

At a high level, the 2018 season was bad – but compared to last year, it could also have been a whole lot worse. Not that that’s any comfort to people who lost homes or family members. Hopefully 2019 will be calmer.

For more information on the 2018 season, see the I.I.I.’s Facts + Statistics: Hurricanes page. And again, get flood insurance.

National Flood Insurance Program take-up rates in select Florida counties

Hurricane Michael is approaching the Florida Panhandle on October 10 as very dangerous Category 4 storm. The map below shows the percentages of properties in high-risk counties that have National Flood Insurance Program flood policies. None of the counties most exposed to storm surge have a take-up rate above 32 percent, and in Liberty County, only 0.6 percent has insurance through NFIP.

The NFIP currently has about 85 percent of the flood insurance market which private companies have shunned for many years. But private companies, including innovative new start-ups like the one described here, are now entering the market and giving consumers a variety of options.

 

You Need Flood Insurance

Homes under water after Hurricane Harvey.

We talk a lot about flood insurance at I.I.I. for at least two good reasons:

  • It’s the most common and costly natural disaster in the United States, with billions of economic losses every year. According to the National Flood Insurance Program (NFIP), 90 percent of natural disasters in the U.S. involve flooding.
  • A 2016 I.I.I. survey found that 43 percent of US homeowners incorrectly think that heavy rain flooding is covered under their homeowners insurance – and only 12 percent had flood insurance.

Floods happen. Regularly. Even if you’re not in a flood zone – and even if you’re not usually in the path of a hurricane. If your home gets flooded, it will be a financial and emotional nightmare: FEMA argues that only 1 inch of water can cause $25,000 of damage to your home.

Your homeowners insurance won’t cover floods: If you don’t have flood insurance for your home, you probably aren’t covered under your homeowners or renters policies because flood risks used to be considered uninsurable.

To address this lack of coverage, the National Flood Insurance Program (NFIP) was created back in the 1960s. The NFIP is a federal program that provides flood insurance to participating communities. If your community participates in the program, you can often purchase insurance through a private insurer that handles policies and claims on behalf of the NFIP.

Private insurers have also recently begun offering flood insurance outside of the NFIP, as new modeling techniques have helped them get a better handle on the risks and costs.

Flood insurance will usually cover physical losses to your home caused by floods or flood-related events, like erosion – with some limitations (trees and fences aren’t covered, for example). You can also buy coverage for the contents inside your home, making flood insurance a crucial tool to help you get back on your feet.

Because disaster assistance won’t be enough: disaster assistance is often only available if you live in a declared disaster area. And even if you are, the FEMA disaster grant is only about $5,000 per household, a fraction of the average flood insurance claim of $30,000.

Flood insurance pays whether you’re in a declared disaster zone or not.

To learn more about how flood insurance works, see our resources here at I.I.I.:

Fitch: P/C Insurers Financially Prepared for Hurricane Season

Via Business Insurance:

U.S. insurers are well prepared at the start of the 2018 hurricane season to withstand a significant catastrophe this year after suffering through last year’s volatile hurricane season, according to Fitch Ratings Inc.

Fitch cited a 7.5 percent increase in surplus last year, to a record $765 billion.

Surplus grew thanks to healthy investment gains, Fitch noted, which more than offset hurricane-driven underwriting losses. U.S. insurers ceded a significant portion of catastrophe losses to offshore reinsurers and alternative capital. And much of the flood loss in the Houston area from Hurricane Harveywere borne by the National Flood Insurance Program.

The heavy reinsurance losses did cause the bottoming out of rates in property and catastrophe reinsurance, Fitch indicated, but increases were “not to the degree that many market participants had anticipated.”