Category Archives: Flood Insurance

Mudslides Often Follow Wildfire; Prepare, Know Insurance Implications

As wildfires continue to burn in California, Oregon, Colorado, and elsewhere – and people pray for precipitation to help firefighters in their efforts – another threat looms: mudslides.  

Wet weather is in Oregon’s forecast, and the Marion County Sheriff’s Office warned that mudslides and falling trees will be a big concern with so much burned land in the county. Areas that could be seriously affected include Mill City and Gates, where much of the towns have been destroyed by wildfires

The sheriff’s office said people need to pay attention to what happens around them and listen to alerts from local authorities. 

“We’re really concerned about as those high winds pick up, some of those coming down and creating more hazards along the roadway, more than we would see in a typical windstorm,” Sgt. Jeremy Landers with the Marion County Sheriff’s Office said.  

He added that it’s important that people have a plan in place in case the weather becomes dangerous. 

Santa Cruz County, Calif., also is preparing for mudslides in the aftermath of the CZU Lighting Complex fire in August. Carolyn Burke, senior civil engineer, said during a special meeting of the Santa Cruz County Board of Supervisors,  “The only effective means of protection” is early warning and evacuation. 

The fire in the Santa Cruz Mountains burned 86,509 acres – and while Cal Fire on September 22 said it was 100% contained, risk remains of fires igniting and the subsequent danger of mudslides when rain comes. Rainy season there has a history of starting from September to November. 

In Colorado, cooler temperatures, rain, and snow have helped suppress the fires that have been  raging across that state. Alaska Incident Management Team Incident Commander Norm McDonald wrote, regarding his team’s work on the Grizzly Creek Fire, “While our assignment ends with the Grizzly Creek Fire at 91% containment, we realize there is still much work to be done and the ramifications of this fire will be long-lived with the potential for mudslides and flooding.”  

For insurance purposes, it’s important to understand the difference between “mudslides” and “mudflow.” 

Mudslides occur when a mass of earth or rock moves downhill, propelled by gravity. They typically don’t contain enough liquid to seep into your home, and they aren’t eligible for flood insurance coverage.  In fact, mudslides are not covered by any policy

Mudflow is covered by flood insurance, which is available from FEMA’s National Flood Insurance Program (NFIP) and a growing number of private insurers. Like flood, mudflow is excluded from standard homeowners and business insurance policies—you must buy the coverage separately. 

If It Can Rain, It Can Flood: Buy Flood Insurance

Rivers swollen by Hurricane Sally’s rains have devastated parts of the Florida Panhandle and south Alabama, and the storm’s remnants are forecast to spread the flooding to Georgia and the Carolinas.

Many of the properties damaged will doubtless be found to be uninsured, compounding homeowners’ misery.

A well-known coverage gap

The flood insurance protection gap has been well documented. A recent Triple-I paper –  Hurricane Season: More Than Just Wind and Water – states that “about 90 percent of all natural disasters in the United States involve flooding” and cites experts strenuously urging everyone to buy flood insurance.

“Any home can flood,” says Dan Kaniewski — managing director for public sector innovation at Marsh & McLennan and former deputy administrator for resilience at the Federal Emergency Management Agency (FEMA). “Even if you’re well outside a floodplain…. Get flood insurance. Whether you’re a homeowner or a renter or a business — get flood insurance.”

Dr. Rick Knabb — on-air hurricane expert for the Weather Channel, speaking at Triple-I’s 2019 Joint Industry Forum — is similarly emphatic.

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

Despite such warnings, even in designated flood zones, the protection gap remains large. A McKinsey & Co. analysis of flood insurance purchase rates in areas most affected by three Category 4 hurricanes that made landfall in the United States — Harvey, Irma, and Maria — found that as many as 80 percent of homeowners in Texas, 60 percent in Florida, and 99 percent in Puerto Rico lacked flood insurance.

To make matters worse, a recent analysis by the nonprofit First Street Foundation found the United States to be woefully underprepared for damaging floods. The report identified “around 1.7 times the number of properties as having substantial risk,” compared with FEMA’s designation.

“This equates to a total of 14.6 million properties across the country at substantial risk, of which 5.9 million property owners are currently unaware of or underestimating the risk they face,” the foundation says.

A more recent Triple-I analysis, conducted in advance of Hurricane Sally, found that flood insurance purchase rates in the counties most likely to be affected by the storm were “remarkably low.”

“In Taylor County, Ga., for example, just 0.09 percent of properties are insured against flooding,” Triple-I wrote.

NOT covered by homeowners insurance

Flood damage is excluded under standard homeowners and renters insurance policies. However, flood coverage is available as a separate policy from the National Flood Insurance Program (NFIP), administered by FEMA, and from a growing number of private insurers, thanks to sophisticated flood models that have made insurers more comfortable writing this once “untouchable” risk.

Invest in resilience

If it seems as if you’ve heard me beat this drum before, you’re right.  I take flood and flood insurance very personally.

After Hurricane Irene flooded my inland New Jersey basement in August 2011, destroying many irreplaceable items, it was my flood insurance that enabled me to have a French drain and two powerful pumps installed that have since kept my historically damp basement bone dry – even during Superstorm Sandy the following year.   

Poll: Homeowners Gain
in Disaster Prep; Coverage Understanding Still Lags

The 2020 Triple-I Consumer Poll found that homeowners are protecting their properties against disasters like flooding and hurricanes at a higher rate than previously reported, a welcome development as the 2020 Atlantic hurricane season got off to an early start and is expected to produce a higher-than-average number of storms.

 “The insurance industry’s focus on resilience is starting to pay dividends as more Americans recognize the very real risks their residences face from floods, hurricanes, and other natural disasters,” said Sean Kevelighan, CEO, Triple-I. “There is still time to act. Hurricane Sally today became the eighth named storm to make landfall in 2020 but the Atlantic hurricane season continues through the end of November.”

However, the poll also found that greater consumer understanding on insurance coverage is still needed.

In something of a surprise, 27 percent of homeowners surveyed reported they have flood insurance, the highest level of flood coverage reported since the Triple-I began asking Americans this question in 2007. Most insurance industry and FEMA National Flood Insurance Program (NFIP) sources estimate anywhere from 10 to 15 percent of U.S. residences are covered under a flood insurance policy.

It is possible a number of Triple-I Consumer Poll respondents with homeowners insurance believe they have flood coverage when they actually do not. The discrepancy between those who have flood insurance and those who think they do gives insurers an opportunity to inform their customers about the need to purchase flood insurance, either from the NFIP or a private insurer, according to the Triple-I.

In addition to floods and hurricanes, the poll looked at how Americans assessed their risks from wildfires and earthquakes and surveyed the percentage of U.S. drivers who received auto insurance premium relief this year after the pandemic reduced miles driven nationwide. 

The poll was conducted in July and is available here.

Ahead of Hurricane Sally’s Rains, Many Lack Flood Insurance

As Hurricane Sally slowly moves over the Gulf Coast in the next few days, historical flooding is predicted from rainfall for parts of Alabama, Georgia, Mississippi, Louisiana, Florida and the Carolinas.

National Weather Service published a map of areas in Gulf Coast states most at risk for flash floods. Triple-I estimated the percentage of properties in these counties that are covered by flood insurance and found that purchase rates are remarkably low in some areas.  In Taylor County, GA for example, just 0.09 percent of properties are insured against flooding.

Standard homeowners and renters insurance policies do not cover flooding. The National Flood Insurance Program (NFIP) and a growing number of private companies sell the coverage. However, NFIP policies purchased now would take 30 days to take effect. Private companies have shorter waiting periods, about 14 days.

To see our interactive map click here.

For more information on flood insurance click here.

Hurricane Season:
More Than Wind & Water

Under the best of circumstances, the Atlantic hurricane season is a challenging time. Despite improved forecasting and analytical tools, pre-storm communication, and engineering, hurricane-related losses continue to climb.

But the 2020 season hasn’t come during the best of circumstances. This extremely active season arrived on the heels of a pandemic that hasn’t ebbed, accompanied by civil unrest and atypical wildfire activity that could draw attention and resources away from preparation and post-storm aid.

And, as if that wasn’t enough, it falls in the middle of what is arguably the most contentious, chaotic U.S. election year in modern history.

To say these new variables complicate resilience would be a gross understatement in a year whose (to use the technical insurance phrase) “general weirdness” would be difficult to overstate.

So, in a paper published today we review the current state of hurricane resilience – how forecasting, modeling, preparation, and mitigation have evolved – and how the insurance industry is working to help communities bounce back from hurricanes.

Demographics more than climate change

Nine of the 10 costliest hurricanes in U.S. history have occurred since 2004, and 2017, 2018, and 2019 were the largest back-to-back-to-back insured property loss years in U.S. history. Many would instinctively chalk up such numbers to climate change. But a careful look at the data suggests climate change isn’t the predominant driver of losses.

U.S. Census Bureau data indicate that the number of housing units in the United States increased most dramatically since 1940 in areas that are most vulnerable to weather-related damage. They also show that new homes are bigger and more expensive than in past decades.

Bigger homes full of more valuables, more cars and infrastructure in disaster-prone locales – these, more than climate trends, seem to be the dominant factors driving losses.

Not more, but wetter

Hurricanes may not be more frequent or significantly more intense due to climate change, but they seem to be getting wetter. Inland flooding has caused more deaths in the United States in the past 30 years than any other hurricane-related threat.

Early in the 2020 season, Tropical Storm Cristobal made landfall along southeastern Louisiana and triggered flash flooding as far inland as northwest Wisconsin.  

“As the atmosphere continues to warm, storms can hold more moisture and bring more rainfall,” said Triple-I non-resident scholar and Colorado State University atmospheric scientist Dr. Philip Klotzbach. This trend could be exacerbated if, as some experts expect, storms begin traveling more slowly, adding to the moisture they would pick up from the ocean and drop over land.

This is why experts we talk with say, “Get flood insurance.”

We’ve come a long way – and have further to go

Our paper also looks at the evolution of hurricane modeling and forecasting, as well as developments in preparation and mitigation.

Better data and improved modeling have made private insurers comfortable writing coverage, like flood insurance, that was previously considered “untouchable” and enabled the creation of entirely new types of insurance products.

But challenges remain. Experts disagree as to which models are best, and the proprietary nature of these models can make it hard for regulators to determine whether filed rates based on them are unfairly discriminatory.

Hurricane preparation and damage mitigation have benefited from improved communication and public planning.

“Many people still don’t evacuate the way they should,” says Todd Blachier of Church Mutual Insurance, “but states like Louisiana, Florida, Alabama and Mississippi have gotten much better in terms of shutting down inbound roads and creating one-way egress to facilitate evacuation.”

He says officials are acting much more quickly and communicating more effectively, thanks in large part to improved information from the National Oceanic and Atmospheric Administration (NOAA) and other resources.

One area in which improvements could boost resilience is building codes and standards. A recent Federal Emergency Management Agency (FEMA) study quantified the losses avoided due to buildings being constructed according to modern, hazard-resistant codes and standards. In California and Florida — two of the most catastrophe-prone states — FEMA found adopting and enforcing modern codes over the past 20 years led to a long-term average future savings of $1 billion per year for those two states combined.

Swiss Re: A Katrina-like hurricane could cause up to $200 billion in damage today

A memorial cross for the victims of Hurricane Katrina stands in the water near the bank of the Mississippi River Gulf Outlet on August 22, 2019 in Shell Beach, Louisiana. According to researchers at the National Oceanic and Atmospheric Administration (NOAA), Louisiana’s combination of rising waters and sinking land give it one of the highest rates of relative sea level rise on the planet. (Photo by Drew Angerer/Getty Images)

Hurricane Katrina, which struck the United States in August 2005, remains the costliest insured North Atlantic hurricane on record and the most expensive natural catastrophe for the global re/insurance industry.  In 2020 dollars, according to a Swiss Re  report released today, total economic damage from Katrina totaled more than $160 billion.

An identical storm today “could easily reach” $200 billion, Swiss Re says.

To evaluate what Hurricane Katrina might look like in 2020 in terms of insured and economic losses, Swiss Re ran Katrina’s 2005 wind and surge footprint on its U.S. market portfolio using its probabilistic tropical-cyclone loss model.

“If Hurricane Katrina were to hit the U.S. in 2020 with the same wind and storm surge as 2005, but with current exposure information and updated flood protection and vulnerability assumptions, the privately insured losses in the U.S. alone could rise to $60 billion,” the report says. “This is true, despite the city (New Orleans) currently only having 80% of the population it did in 2005.”

Private insurance and the federal flood insurance program covered about $86 billion of the total loss, highlighting a protection gap largely driven by uninsured flood losses. Standard residential insurance policies exclude coverage for flood damage resulting from surface water, including storm surge caused by hurricanes; separate flood insurance policies are available through FEMA’s National Flood Insurance Program and private insurers.

“With Katrina, and even more recently with Harvey and Sandy and Florence, we’ve seen this profound protection gap where on average only one in six residences in the U.S. have a flood coverage policy,” said Marla Schwartz Pourrabbani, a Swiss Re natural catastrophe specialist and lead author of the report.

Today, a storm like Katrina would cause closer to $175 billion in damage because areas outside New Orleans, especially in other coastal states, have seen both increases in population and increased investments along the coast that add to the financial risk. Rising sea levels also contribute to the potential losses.

Swiss Re says the effects of climate change could drive total costs  higher.

“Considering that sea level in the barrier islands near New Orleans is now rising by over one inch every two years, a six-inch increase in sea level — and an event like this could happen in just over a decade,” the report says.

Mangroves and Reefs: Insurance Can Help Protect Our Protectors

Hurricanes and storm-related flooding are responsible for the bulk of damage from disasters in the United States, accounting for annual economic losses of about $54 billion, according to the Congressional Budget Office (CBO).  

These losses have been on the rise, due, in large part, to increased coastal development. More, bigger homes, more valuables inside them, more cars and infrastructure – these all can contribute to bigger losses. The CBO estimates that a combination of private insurance for wind damage, federal flood insurance, and federal disaster assistance would cover about 50 percent of losses to the residential sector and 40 percent of  commercial sector losses. 

Recent research illustrates the benefits provided by mangroves, barrier islands, and coral reefs – natural features that frequently fall victim to development – in terms of limiting storm damage. In many places, mangroves are the first line of defense, their aerial roots helping to reduce erosion and dissipate storm surge. A healthy coral reef can reduce up to 97 percent of a wave’s energy before it hits the shore. Reefs — especially those that have been weakened by pollution, disease, overfishing, and ocean acidification — can be damaged by severe storms, reducing the protection they offer for coastal communities. 

In Florida, a recent study found, mangroves alone prevented $1.5 billion in direct flood damages and protected over half a million people during Hurricane Irma in 2017, reducing damages by nearly 25% in counties with mangroves. Another study found that mangroves actively prevent more than $65 billion in property damage and protect over 15 million people every year worldwide.  

A separate study quantified the global flood-prevention benefits of coral reefs at $4.3 billion.  

Such estimates invite debate, but even if these endangered systems provided a fraction of the loss prevention estimated, wouldn’t you think coastal communities and the insurance industry would be investing in protecting them? 

Well, they’re beginning to.  

The Mexican state of Quintana Roo has partnered with hotel owners, the Nature Conservancy, and the National Parks Commission to pilot a conservation strategy that involves coral reef insurance. The insurance component – a one-year parametric policy – pays out if wind speeds in excess of 100 knots hit a predefined area. Unlike traditional insurance, which pays for damage if it occurs, parametric insurance pays claims when specific conditions are met – regardless of whether damage is incurred. Without the need for claims adjustment, policyholders quickly get their benefit and can begin their recovery. In the case of the coral reef coverage, the swift payout will allow for quick damage assessments, debris removal, and initial repairs to be carried out.  

Similar approaches could be applied to protecting mangroves, commercial fish stocks that can be harmed by overfishing or habitat loss, or other intrinsically valuable assets that are hard to insure with traditional approaches.  

Hurricanes Don’t Just Affect Coasts; Experts Say: “Get Flood Insurance”

With the 2020 Atlantic hurricane season activity expected to be “well above average” in intensity; three named storms having formed already; and Tropical Depression Cristobal bringing flooding rains and powerful winds from the South to the Midwest as it made landfall in Louisiana, preparedness should be on the minds of everyone who could be affected – and that means more than just people in coastal states.

Cristobal’s low pressure area is forecast to move from the lower Mississippi Valley to the Midwest – just ahead of a cold front that will eventually absorb Cristobal’s remnants as it moves into southeastern Canada, according to Weather.com: “The combination of deep, tropical moisture from Cristobal and the cold front will wring out heavy rain along a swath from the lower Mississippi Valley into the Midwest. Strong winds will also develop in the Midwest and Great Lakes from this setup.”

If Cristobal remains a tropical depression when it crosses into Wisconsin, it would be the first tropical depression on record in the state, according to the National Weather Service in Milwaukee.

“Inland flooding has resulted in more deaths in the past 30 years from hurricanes and tropical storms in the U.S. than any other threat,” said CNN meteorologist Brandon Miller. “Though wind speeds and storm surge are important, and get a lot of the headlines, flash flooding from intense rainfall associated with the storm’s rainbands impact far more people and stretch over a much larger area.”

About 90 percent of all natural disasters in the U.S involve flooding. This is why experts like Dan Kaniewski – managing director for public sector innovation at Marsh & McLennan and former deputy administrator for resilience at the Federal Emergency Management Agency (FEMA) – strenuously urge everyone to buy flood insurance.

If it can rain, it can flood

“Any home can flood,” Kaniewski said in a recent Triple-I webinar. “Even if you’re well outside a floodplain…. Get flood insurance. Whether you’re a homeowner or a renter or a business – get flood insurance. It’s not included in your homeowners policy, and most people don’t understand that.”

Dr. Rick Knabb – on-air hurricane expert for the Weather Channel, speaking at Triple-I’s 2019 Joint Industry Forum – was similarly emphatic:

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

He recounted buying a new home, asking his agent about flood insurance, and being told, “You don’t need it.”

“I told him, ‘Get it for me anyway,’” Knabb said.

Flood insurance purchase rates too low

As the Triple-I blog previously reported, 2019 was the second-wettest year on record across the continental U.S., yet flood insurance purchase rates remain low. To illustrate the difference between having and not having flood insurance, Kaniewski described two scenarios related to 2017’s devastating Hurricane Harvey.

“The average [FEMA] payout for the uninsured homeowner in the Houston area was about $3,000,” Kaniewski said. “But if you were proactive and took out a relatively low-cost flood insurance policy…you would have received not $3,000 but $110,000. You’re not going to recover on $3,000, but with $110,000, you’d be well on the path to recovery.”

Unfortunately, he said, even inside designated floodplains, “two-thirds of homeowners do not have flood insurance.”

Coronavirus Wrap-up: Property/Casualty (4/7/2020)

Below are abstracts and links to recent articles related to coronavirus from a property and casualty insurance perspective.

Auto:
Less driving, fewer accidents: Car insurers give millions in coronavirus refunds

One of the largest car-insurance companies in the country and a smaller Midwestern auto insurer are refunding hundreds of millions of dollars to their policyholders, citing a dramatic drop in accident claims from Americans hunkered down in their homes, The Wall Street Journal reports.

Allstate providing more than $600M to auto insurance customers amid pandemic

Allstate announced that it’s providing a Shelter-in-Place Payback to help its personal auto insurance customers during the pandemic.

Business Interruption:

This insurance would have helped in coronavirus crisis; nobody bought it

PathogenRX, a parametric insurance policy developed by broker Marsh, Munich Re, and technology firm Metabiota, is designed to provide business interruption insurance in the event of a pandemic, Insurance Journal reports.

Wimbledon nets £100m coronavirus cancellation payout

When the coronavirus outbreak forced the cancellation of Wimbledon it looked like game, set, and match against the All England Club. It turns out, The Times reports, that the club has insurance that covers infectious diseases and is putting together a claim potentially in excess of £100 million.

Insurers warn on forced payouts for uncovered coronavirus losses

World insurers told governments on Monday that making them pay out on losses suffered due to the coronavirus that were not covered by policies risked destabilizing the insurance industry, Reuters reports.

Considering a business interruption insurance claim due to COVID-19? Check your policy first

Insurance brokers say viruses and pandemics are specific exclusions in many such policies, which are often included with standard property and casualty coverage. But whether COVID-19 is the basis for a business interruption claim remains an open question as government leaders and the plaintiffs’ bar wrestle over the issue.

How social inflation may affect coronavirus business interruption losses

COVID-19 could produce a big increase in social inflation, according to A.M. Best. The reason: expectations that businesses will sue their insurers in an attempt to access their business interruption coverage for losses relating to the coronavirus pandemic.

After SARS, insurers changed policies covering businesses

SARS infected 8,000 people and led to millions of dollars in business-interruption insurance claims – including a $16 million payout to a single hotel chain. As a result, The Washington Post reports, many insurers added exclusions to standard commercial policies for losses caused by viruses or bacteria.

Flood:

FEMA extends flood renewal period

The Federal Emergency Management Agency (FEMA) announced that it will extend the grace period to renew flood insurance policies to help policyholders affected by the coronavirus (COVID-19) pandemic. FEMA said it would push back the grace period from 30 days to 120 days.

Property:

Florida’s property insurer of last resort, announced it will suspend cancellations and non-renewals for the next 45 days.

Wildfire:

Firefighters say coronavirus will obstruct emergency service, evacuations as wildfire season closes in

First responders are preparing for raging wildfires that they expect will consume thousands of acres and drive some residents from their homes in upcoming months. But this year, CNBC reports, preparations have stalled. The coronavirus pandemic has hit the country’s already strained emergency services, raising concerns over inadequate disaster relief during peak fire season.

Workers Compensation:

Catch coronavirus on the job? In Florida, workers comp may not cover you

Florida’s Chief Financial Officer has ordered the Division of Risk Management to fulfill workers’ compensation claims for frontline employees who work for the state, the Tampa Bay Times reports. But the order doesn’t include similar workers in the private sector.

2020 Hurricane Season Projected to Be “Above Normal”

The 2020 Atlantic hurricane season activity is projected to be “above normal,” according to Triple-I non-resident scholar Dr. Phil Klotzbach.

Dr. Klotzbach, an atmospheric scientist at Colorado State University (CSU), and his team have issued an early forecast of 16 named storms, eight hurricanes, and four major hurricanes for the year, with above-average probability for major hurricanes making landfall along the continental United States coastline and in the Caribbean.

A typical year has 12 named storms, six hurricanes, and three major hurricanes. Major hurricanes are defined as Category 3, 4, and 5 storms, where wind speeds reach at least 111 miles per hour.

The forecast is based partly on the fact that El Niño conditions are unlikely this summer and fall.

“El Niño is warmer-than-normal water in the Central and Eastern Tropical Pacific,” Dr. Klotzbach said. “When it occurs, it tends to increase upper-level westerly winds that tear apart hurricanes when the try to develop.”

The chart below shows 2020 hurricane probabilities for 18 coastal states.

A lot can change between now and the peak of the season though, so an updated forecast will be issued on June 4.

As is the case with all hurricane seasons, coastal residents are reminded that it only takes one hurricane making landfall to make it an active season for them. They should prepare the same for every season, regardless of how much activity is predicted.

For the full forecast report click here: 
https://tropical.colostate.edu/media/sites/111/2020/04/2020-04.pdf

For information on hurricane-proofing your home and business, check out the following:

Flood Policy Renewal Period Extended

The Federal Emergency Management Agency (FEMA) announced it is extending the grace period to renew flood insurance policies from 30 days to 120 days to help policyholders who may be experiencing financial difficulties due to the coronavirus pandemic. The extension applies to National Flood Insurance Program (NFIP) policies with an expiration date between February 13 and June 15, 2020.

Said David Maurstad, the FEMA administrator who oversees the NFIP, “We want to make sure that policyholders don’t have to worry that their policy will lapse during the spring flood season or into the start of hurricane season.”