Category Archives: Floods

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.  

Understanding FEMA and other flood maps

On June 29 the First Street Foundation, a nonprofit research firm, released an analysis of flood risk which shows that nearly 6 million of the nation’s properties are at more substantial risk of flooding than indicated by the Federal Emergency Management Agency’s (FEMA) maps.

FEMA replied with a statement that its maps are intended for floodplain management and decisions about emergency responses and that its flood insurance risk maps do not conflict with First Street’s maps since the two complement one another by showing different types of risk.

To help explain how flood maps work, Dr. Michel Léonard, Vice President & Senior Economist, Triple-I, wrote the following post.

Flood maps are used to identify and communicate a property’s exposure to flood. 

Flood maps rank exposure from lowest to highest by categorizing an area into a set of standardized flood zones, with each zone assigned its own flood exposure level. Flood exposure is normally expressed as a percentage representing flood frequency and/or severity over a specific number of years. This approach is similar to maps for other natural perils. 

The most commonly used flood map is FEMA’s nationwide flood map. There are also several high-quality flood maps from academia, non-profits and businesses, each providing added perspectives. These maps aren’t meant to be better than one another but rather, together, to provide a fuller understanding of the risks caused by floods to homeowners, businesses, and communities.

First Street’s flood map is an example of such maps: scientific, credible, and insightful in its contribution to the discussion about current and changing flood exposure. Its main insight, that flood risk and exposure may be higher than currently implied by FEMA’s or other maps, is not a controversial statement but rather adds to the growing consensus across flood experts that flood risk is increasing in frequency and severity nationwide as a result of extreme weather events. FEMA recommends reviewing its own flood map every year due to exposure changing over time. 

The main takeaway from flood maps for consumers and businesses is learning about their own relative exposure vis-à-vis other locations. Homeowners and businesses should use flood maps to better understand their current exposure and determine, for example, whether their property insurance is adequate or considering preemptive risk mitigation. 

Homeowners and businesses thinking about moving should look at these maps before deciding about where to go. Will they be more or less exposed to flood?  How will the new location’s flood exposure impact their mortgage, their insurance costs?

That said, while all flood maps provide insight into flood exposure, FEMA’s flood map remains different from others. As a government provided flood map, it is a countrywide benchmark for flood risk identification and quantification. It is used by different levels of government, regulators, first responders and insurance companies. For example, homeowners and businesses should know that a property’s location within a specific FEMA flood map zone is the sole benchmark for mortgage lenders requiring flood insurance in order to get a mortgage. 

For more about FEMA’s flood map see: www.floodsmart.gov/flood-map-zone/about

Triple-I Paper Looks at Convective Storms, Mitigation, and Resilience

Severe convective storms—tornadoes, hail, drenching thunderstorms with lightning, and damaging straight-line winds—are among the biggest threats to life and property in the United States. They were the costliest natural catastrophes for insurers in 2019, and this year’s tornado season is already shaping up to be the worst in nearly a decade.

A new Triple-I paper describes how population growth, economic development, and possible changes in the geography, frequency, and intensity of these storms contribute to significant insurance payouts. It also examines how insurers, risk managers, individuals, and communities are responding to mitigate the risks and improve resilience through:

  • Improved forecasting,
  • Better building standards,
  • Early damage detection and remediation, and
  • Increased risk sharing through wind and hail deductibles and parametric insurance offerings.

The 2020 tornado season coincided with most of the U.S. economy shutting down over the coronavirus pandemic. This could affect emergency response and resilience now and going into the 2020 hurricane season, which already is being forecast as “above normal” in terms of the number of anticipated named storms.

FEMA Report Recommends New Mechanisms to Ward Against Natural Disasters

By Max Dorfman, Research Writer

The U.S. Federal Emergency Management Agency (FEMA) is being pressed to adopt innovative methods to increase insurance penetration for floods and other natural disasters. In a draft report, FEMA’s National Advisory Council suggests that in order to increase financial preparedness for householders and local governments, novel financial models must be considered. The report notably mentions parametric triggers as a way to grow the insurance markets and protect against future disasters. Blockchain is also recommended as a means to create a land and property registry stored off-site in a secure platform.

What are parametric triggers, and how can they help?

Parametric insurance is a type of insurance that agrees—before the triggering event—to make a certain payment, instead of compensating for the pure loss. Parametric insurance pays out immediately when a certain threshold, such as water depth or wind speed, is reached; thus, expediting funding and reducing overall administrative costs.

What does the future hold for this new model?

“When added to the ubiquitous nature of smartphones and other levels of connectivity, the opportunity for expanding parametric insurance protection to individual households may merely be a matter of connecting the dots, for which FEMA is uniquely placed to lead this effort,” the Council’s report states.

Indeed, the Council believes that FEMA should “look towards a new model of insurance” in an age when natural disasters increasingly threaten both public and private interests.

The draft report also includes many suggestions to improve disaster preparedness, such as better building codes and code compliance, better preparedness for Indian tribes and rural communities, building resilient infrastructure and increasing funding for mitigation.

To close the insurance gap the report recommends:

  • Educating the public about the benefits of flood renter’s insurance and hidden hazards in real estate, rental properties and communities.
  • Stress testing state insurance guaranty funds to determine if they can withstand large-scale disasters and insurer insolvencies.
  • Creating more offerings for state and local governments to reduce rates of self-insurance of infrastructure.

 

Nearly 80 percent of homeowners in coastal Carolinas uninsured for flood

As Hurricane Dorian churns northward off the coast of South Carolina as a Category 2 storm, the National Hurricane Center continues to forecast dangerous storm surge conditions through the Carolinas, up the coast into Virginia, as of 11 a.m. September 5.

I.I.I. infographic based on Aon estimates of NFIP data

Using National Flood Insurance Program policy takeup rates as estimated by Aon, the six coastal counties in South Carolina average a 28 percent flood insurance takeup rate, compared to a 16 percent takeup rate for the 21 coastal counties in North Carolina. Dare County in North Carolina had the highest takeup rate of both states, with 61 percent, and Hertford County had the lowest in the two states, at 1.0 percent. Overall South Carolina has 204,372 total policies in force, with 2,284,722 housing units statewide. North Carolina has 132,983 policies in force for 4,622,575 housing units statewide.

The graphic below shows the probability of storm-induced flooding for the Carolina coast as of September 5 at 2 p.m. eastern.
For up-to-date flood probability click here.

USGS Coastal Change Hazards Portal

More flood insurance facts and statistics from the I.I.I. are available here.

Buyer beware: In Barry’s wake, flooded cars are about to hit the used car market, NICB warns

Getty Images

Hurricane Barry made landfall on July 13 as the first hurricane of the 2019 season, dumping heavy rain on parts of Louisiana, Mississippi and Arkansas. Unfortunately, whenever there’s flooding there are unscrupulous people ready to unload flooded cars onto credulous consumers, and vehicles flooded by Barry may soon appear for sale around the nation.

The National Insurance Crime Bureau (NICB) warns that buyers should be particularly careful in the coming weeks and months as thousands of Barry-damaged vehicles may reappear for sale in their areas. Vehicles that were not insured may be cleaned up and put up for sale with no disclosure of the flood damage, which is illegal.

“When tragedy strikes criminals have the tendency to swoop in and scam consumers especially when it comes to the resale of flooded vehicles,” said Brooke Kelley, communications vice president of the National Insurance Crime Bureau (NICB).

Flood-damaged vehicles can exhibit a host of problems ranging from electrical malfunctions, mold and mildew, corrosion of various parts and slippery brakes. Corrosion can find its way to the car’s vital electronics, including airbag controllers, warns Consumer Reports.

The NICB offer the following tips to avoid being scammed:

  • Don’t rush to buy a used vehicle, especially if the price looks too good to be true.
  • Look for water stains, mildew, sand or silt under the carpet, floor mats, and dashboard, and in the wheel well where the spare is stored. Look for fogging inside the headlights and taillights.
  • Do a smell test. A heavy aroma of cleaners and disinfectants is a sign that someone’s trying to mask a mold or odor problem.
  • Get a vehicle history report. Check a trusted database service. You can check NICB’s free VINCheck database.
  • Have a trusted mechanic inspect the car’s mechanical and electrical components, and systems that contain fluids, for water contamination.

After a disaster, NICB works with its member companies, law enforcement, and auto auction companies to identify the vehicles that have had an insurance claim filed. Most of the vehicles are sold to parts companies who will dismantle them and resell usable parts that were not damaged by the flooding.

The Vehicle Identification Number (VIN) of vehicles that have been damaged by Barry will be searchable through NICB’s free VINCheck® service as well as the National Motor Vehicle Title Information System (NMVTIS) database.

VINCheck allows car buyers to see whether a vehicle has ever been declared as “salvage” or a total loss by an NICB member that participates in the program. Insurers representing about 88 percent of the personal auto insurance market provide their salvage data to the program. It also alerts users if a vehicle has been stolen and is still unrecovered.

 

Blue Marble and Nespresso launch parametric weather insurance pilot for smallholder coffee farmers in Colombia

Blue Marble Microinsurance and Nespresso have developed  a pilot program to bring weather index insurance to coffee farmers in Colombia, according to a recent Artemis blog.

Coffee crops are exposed to great risk from weather conditions, and farmers in developing countries often lack insurance options. The program provides coverage for excess rainfall and drought during the developmental stages in which coffee is most vulnerable.

Satellite technology is used to obtain the data required to create the weather indices against which the parametric policies can be triggered. If excess rainfall or drought occurs in a covered area, payments can be made automatically and quickly without the need for time-consuming claims assessment.

“This pilot initiative helps to establish a support mechanism for smallholder coffee farmers in Colombia so that they can continue to thrive in the face of climate change,” said Guillaume Le Cunff, President and CEO of Nespresso USA.

The program is a good example of the growth of microinsurance, which provides affordable insurance coverage to low income populations in developing counties.

To learn more about microinsurance, click here.

 

Your car got flooded. Will your insurance help?

flooded cars are bad news.

So your car got flooded and two thoughts immediately flash in your head: how am I going to get to work and how am I going to pay for this mess?

I can’t help you with the first question, but the answer to the second is easy: insurance.

Comprehensive auto coverage: If you’re one of the 78 percent of Americans that opted to purchase comprehensive auto coverage, you’re in luck. Standard comprehensive coverage will pay for damages to your car caused by water or flood, subject to a deductible. It’ll even cover you if hail smashes your windows to pieces and rain ruins your leather seats.

If your car is so water-logged that it’s inoperable, then it might be a “total loss” – meaning that paying to fix it is greater than how much your car is worth. If it’s a total loss, your insurance will pay you the actual cash value for the car (that’s the purchase price minus any depreciation since you bought the car) and then salvage it.

Not everything is covered: But comprehensive coverage is not all sunshine and roses. It won’t cover you for any of your electronic equipment in the car that’s not permanently installed (think: your GPS navigation if for some reason you don’t use your smartphone for that – but your smartphone isn’t covered either). Comprehensive is also probably not going to help you out if you left your windows open during a rainstorm, so keep your eye on that weather forecast.

What if I don’t have comprehensive coverage? Unfortunately, if you didn’t opt in for extra coverage, you’re probably out of luck. Basic auto insurance doesn’t cover flood and water damage. Your homeowners and renters policies probably also won’t help: these policies don’t cover damage from floods. If you have a newer or higher-value vehicle, this lack of coverage could be a serious problem.

As FEMA puts it, “anywhere it can rain, it can flood.” The odds are good that you live in a place where your car can get damaged from water or floods. Speak to your insurance agent or carrier about whether comprehensive coverage is the right move for you and your vehicle.

Hurricane Dos and Don’ts

If you live in the projected path of Hurricane Florence, you should be prepping your home and finalizing your emergency and evacuation plans.  

Heavy rain and wind storm at a beach front condo property.

Here are some Dos and Don’ts to consider for prepping and riding out the storm.  

Don’t: 

  • Don’t go outside during the storm. This is a no-brainer. Even a category 1 hurricane can reach sustained winds of 74 mph. Category 5 winds are over 156 mph. Wind speeds like this can turn even small debris into deadly missiles. And don’t be fooled by the eye of the storm – there will be a period of calm before the hurricane force winds return from the opposite direction.
  • Don’t grill indoors. If your power goes out, don’t be tempted to throw some steaks onto a grill indoors. Charcoal or gas grills can release deadly levels of carbon monoxide.
  • Don’t drink non-bottled or untreated water. Flood waters are often filled with bacteria and other contaminants – including sewage. Don’t drink tap water – and don’t drink any water exposed to flood water, including bottled water. The FDA has tips on how to make your tap water safe to drink.
  • Don’t drink alcohol. I repeat: Don’t drink alcohol during a hurricane. You never know when you will need to evacuate at a moment’s notice or deal with a life-threatening emergency. You’re going to want all your wits about you while the hurricane is raging – lives could depend on it, yours included. That’s why some jurisdictions will ban alcohol sales prior to a hurricane.  

Do: 

  • Do stock up on lots of water. The CDC recommends at least 5 gallons of water per person. You may also want to buy iodine tablets to clean drinking water.  
  • Do make sure you have more to eat than chips and salsa. Or bread, for that matter – you’re going to want to have lots of non-perishables with nutritional value, especially canned foods. A minimum 3 to 5-day supply per person is recommended.
  • Do prepare your house properly. Clear your yard of furniture or anything else that could blow away. Cover your windows and doors using storm shutters or plywood – and stay away from windows and doors during the storm, if you can. Make sure your carbon dioxide detector has enough battery life to prevent CO poisoning. (Check out a longer list for house prep here. I.I.I. also recently gave some advice on preparing your home.)
  • Do be responsible and prepare for the worst. Make sure you have emergency and evacuation plans in place before the storm hits. Communicate these plans to everyone at your house. Find out where the nearest storm shelter is. Keep track of the storm. Have flashlights and extra batteries ready. Buy a first aid kit. Ready.gov has more advice here 

These are not exhaustive lists. Make sure to check governmental information for help on prepping for a hurricane. And be safe out there. Hurricanes are not a joke.