Hurricane Delta last month triggered a 17 million peso (US $800,000) insurance payout to the Trust for the Integrated Management of the Coastal Zone, Social Development, and Security for the State of Quintana Roo, Mexico. The parametric policy, deployed last year, cost the trust nearly 5 million pesos (US $230,000), covering 150 square kilometers (58 square miles) of coastal ecosystems for the entire 2020 hurricane season.
Recent research illustrates the benefits provided by mangroves, barrier islands, and coral reefs – natural features that frequently fall victim to development – by limiting tropical storm damage, particularly from storm surge. Unlike traditional insurance, which pays for damage if it occurs, parametric insurance pays 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.
Quintana Roo partnered with hotel owners, the Nature Conservancy, and the National Parks Commission to pilot a conservation strategy involving a parametric policy that pays out if wind speeds greater than 100 knots hit a predefined area.
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.
By Max Dorfman, Research Writer, Insurance Information Institute
Hurricane Zeta became the 11th named storm and 6th hurricane to hit the United States yesterday, as the extremely active 2020 Atlantic hurricane season continues. Zeta struck just one day before the eighth anniversary of Superstorm Sandy.
Sandy was the deadliest and most destructive hurricane of the 2012 Atlantic season, causing $70 billion in economic damages and resulting in over 70 fatalities when it made landfall in New Jersey. It surprised an under-prepared New Jersey and New York City when it arrived. Sandy was no longer a hurricane when it made landfall, having undergone transition into an extra-tropical (e.g., non-tropical) low pressure area earlier that day. Although it was no longer a hurricane upon its arrival, it was still immensely damaging due especially to its large size, as well as its interaction with a strong storm system moving east.
There is some history of late-season hurricanes, but Colorado State University climate scientist and Triple-I non-resident scholar Dr. PhilKlotzbach says it would be an overstatement to call this a trend.
“We haven’t really seen a trend in late-season hurricane activity,” Klotzbach said. “A lot of what drives late-season hurricane activity is the phase of El Niño or La Niña. If you have a La Niña, like we have this year, which is colder water in the eastern and central tropical Pacific, that tends to reduce the vertical wind shear that typically tears apart hurricanes. Reduced wind shear tends to keep the hurricane season going longer.”
Klotzbach noted that 2012 was neither an El Niño nor La Niña year.
What made Sandy different?
Hurricane Sandy was a massive aberration.
“Normally, when storms spin up in the Caribbean and move northeast, they continue moving northeast into the North Atlantic and do not significantly impact land,” Klotzbach said. “Unfortunately, with Sandy it started moving northwest.” Indeed, Sandy managed to wreak havoc across the Northeast and other parts of the country, including dumping as much as 36 inches of snow in West Virginia.
“There was a big high-pressure area over the Atlantic Provinces of Canada that built to the north of Sandy and drove the storm to the northwest,” Klotzbach explained. “The sustained winds were strong, maxing out around 80 mph, but the real problem with Sandy was its tremendous size.”
Given the large size of Sandy, it drove a huge storm surge that spanned from New Jersey to Connecticut including New York City.
“The storm surge from Sandy was incredible,” Klotzbach said. “The surge also coincided with astronomical high tide, which exacerbated the inland penetration of water from the coast. For example, the storm tide at the Battery on the southern tip of Manhattan exceeded 14 feet.”
What we can do
The public needs to be more informed about the dangers of these kinds of storms. Even though Sandy wasn’t technically a hurricane when it made landfall in New Jersey, Klotzbach believes the transition of the storm from hurricane to extra-tropical may have been confusing for people who didn’t understand that the storm wasn’t less of a threat after its classification was altered.
“Just because the storm was changing in structure doesn’t mean it wasn’t a significant threat,” Klotzbach said. “It had just about the same maximum winds as when it was a hurricane. People also looked at the maximum wind and saw that it was 80mph and didn’t think it was that much of a problem. But it was an enormous storm, so the surge was much bigger than what you’d expect from an average category 1 hurricane. From that perspective, there were challenges with conveying the magnitude of the threat.”
Indeed, Klotzbach gives a dire warning about the risks associated with not taking these storms seriously.
“A lot of it is in the messaging when these storms are going from tropical to extra-tropical,” he said. “We need to convey how these threats are changing and that just because a system is becoming extra-tropical doesn’t mean that the threat has gone away. We need to get more social science integrated into meteorology to better convey these results to the general public.”
Earlier this year, I wrote about the role mangrove forests and coral reefs play in mitigating tropical storm damage and how insurance might help protect these critical resources. A recent Nature Conservancy study looks specifically at opportunities in mangrove protection and restoration and identifies where insurance could be used to support their resilience benefits.
In many places, mangroves are the first line of defense, their aerial roots helping to reduce erosion and dissipate storm surge. In Florida, one 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 mangroves actively prevent more than $65 billion in property damage and protect over 15 million people every year worldwide.
Unfortunately, they frequently fall victim to development that creates the greatest potential for storm-related losses.
The Nature Conservancy study describes the implementation of a coral reef insurance product in Quintana Roo, Mexico, and explores how the model could be adapted for mangrove preservation. In Quintana Roo, a trust fund accepts money from public, private and philanthropic sources, as well as a federal fee collected from beachfront property owners who wish to use the beach for commercial purposes. It uses those funds to buy the insurance – a parametric product that is triggered if wind speeds in a designated area exceed 100 knots.
Parametric policies cover risks without the complications of sending adjusters to assess damage after a catastrophe. Instead of paying for damage that has occurred, it pays out if certain agreed-upon conditions are met – for example, a specific wind speed or earthquake magnitude in a particular area. If coverage is triggered, a payment is made, regardless of damage. Speed of payment and reduced administration costs can ease the burden on both insurers and policyholders.
“Unlike coral reefs, however, mangroves do not usually require rapid post-storm interventions in order to survive,” the study says. This means an indemnity insurance policy might be created that delivers payments based on post-catastrophe assessments of mangrove damage. “There are a variety of insurance products available that can be tailored to meet the specific needs of mangroves, with initial payouts made quickly through parametric covers and assessed payouts made through indemnity cover at a later stage.”
Before a mangrove insurance policy can be developed and deployed, a full feasibility study would need to be conducted. The Nature Conservancy report recommends that this include “higher-resolution flood-risk models, estimation of the wind-reduction benefits of mangroves, and the construction of fragility curves to show the relationship between damage to a mangrove forest and some component of a storm event, such as storm surge or wind speed.”
The FORTIFIED construction certification was developed by the Insurance Institute for Business and Home Safety (IBHS) to protect homes against severe weather. In this post Fred Malik, managing director, FORTIFIED, and Chuck Miccolis, managing director, Commercial – IBHS, talk about how the system held up in Alabama against Hurricane Sally.
In 2004, Hurricane Ivan slammed into Alabama causing widespread devastation. Unwilling to let the same damage happen again, thousands of homeowners and commercial property owners have turned to IBHS’s FORTIFIED program to protect their properties and prepare for the next big storm.
Last month, the ‘next big storm’ came. Exactly sixteen years since Hurricane Ivan made landfall, Hurricane Sally crawled its way onto the Alabama coast. The Category 2 storm subjected homes and businesses to more than 8 hours of relentless winds. While the aftermath of Sally’s landfall vividly showed too many buildings are still not built as strong as they could be, those in the area built to the FORTIFIED standard provide hope for a more resilient future.
More than 16,000 FORTIFIED properties were put to the test and they demonstrated homes and businesses can be built better. In the days following Sally’s landfall, IBHS conducted field assessments across coastal Alabama to better understand building performance, including dozens of FORTIFIED properties. To date, indications are that more than 90% of the thousands of FORTIFIED buildings had zero to minor cosmetic damage. As a wind standard, FORTIFIED performed to its design.
The evidence is clear driving through Baldwin County, Alabama – home and business owners who had a FORTIFIED Roof didn’t need a blue tarp, didn’t have significant water intrusion through the roof, and businesses were able to re-open as soon as flooding abated and power was restored. Most observed damage was only cosmetic, and disruption was minimized, meaning those who made the decision to strengthen their properties aren’t dealing with the headache of rebuilding. Because FORTIFIED provides layers of protection, it stopped the cascade of damage before it started.
Some FORTIFIED homeowners were even able to offer refuge for neighbors in need. Having benefited from local incentives to build stronger, some FORTIFIED homeowners in Orange Beach experienced no damage from wind or wind-driven rain, while neighbors were forced to make repairs as well as tear out and throw away much of the contents of their homes.
Another poignant example took place at the Lodge at Gulf State Park, which had been completely destroyed by Hurricane Ivan. Determined to overcome the vulnerabilities Ivan had so devastatingly exposed, the property owners wanted to be a leader in demonstrating to the community how to build back stronger. They turned to the FORTIFIED program.
The hotel was rebuilt in 2019 to the FORTIFIED standards, and IBHS verified the construction process and material selection complied with those standards. Evaluators, trained by IBHS, guided construction and design teams to minimize flaws that otherwise may have gone unnoticed. As a result, when Hurricane Sally’s eyewall passed directly over the Lodge, it not only continued operations, it also housed employees who did not have FORTIFIED homes. Additionally, many media outlets, including The Weather Channels, chose to stay at the lodge to cover the storm and, some unknowingly, benefitted from the protection of FORTIFIED to report on the hurricane, perhaps prompting FEMA Administrator Pete Gaynor to emphasize “mitigation works.”
Continuing the post-storm research, IBHS will develop an analysis of key factors influencing the performance of these FORTIFIED structures. Preventing avoidable damage is one of IBHS’s three imperatives, and Sally demonstrated how FORTIFIED achieves that mission. For more information, go to fortified.org.
Hurricane Delta made landfall in Creole, Louisiana, on October 9 as a Category 2 storm with 101 mph sustained winds and a 9.3-foot storm surge. Landfall in Cameron Parish was within 13 miles of where Category 4 Hurricane Laura made landfall in late August. Delta knocked out power to over 500,000 customers in Louisiana (a quarter of the state’s homes), plus another 300,000 in parts of east Texas and western Mississippi. It was a record-setting 10th continental U.S. landfall of a named storm during a single hurricane season and record-tying fifth hurricane continental U.S. landfall in a season.
Similar paths by Hurricanes Laura and Delta in Louisiana triggered the state law that stipulates that policyholders are not required to pay a hurricane deductible twice in the same storm season. State Insurance Commissioner Jim Donelon said that for people who did not exhaust their deductible during Laura, the remainder would apply to Delta only if the unused amount is larger than the standard all-perils deductible. It is not known yet how many people suffered damage from Delta.
Insured loss estimates for Hurricane Delta range from $1 billion to as high as $3 billion, according to catastrophe risk modelling specialist AIR Worldwide. The company warns of the potential for loss increase due to hurricane Delta’s impacts coming so soon after hurricane Laura’s. Karen Clark & Company’s estimate that onshore insured losses will be about $1.25 billion and CoreLogic estimates that onshore and offshore insurance market losses from Delta will be between $1.5 billion and $2.7 billion.
During a live interview on The Weather Channel’s Weather Underground on Monday, October 12, the Triple-I’s Mark Friedlander discussed property losses for Louisianans who were impacted by hurricanes Delta and Laura. He also provided claims-filing tips.
Hurricane Delta is surging closer to the U.S. Gulf Coast and is expected to land on the evening of October 9 somewhere on Louisiana’s southwest coast. Dr. Phil Klotzbach, CSU research scientist and Triple-I non-resident scholar gives an update on Delta in the video clip above.
The hurricane has grown in size since yesterday and a large area of the country will see impacts from the storm. Hurricane warnings are in place from High Island, TX to Morgan City, LA, and storm surge warnings extend from High Island, TX to the mouth of the Pearl River.
In addition to strong winds Delta is expected to bring storm surge as high as 7 to 11 feet along the coast of central LA, rainfall totals are forecast to be from 5 to 10 inches from southwest to central LA, with isolated totals of up to 15 inches.
Delta is on track to hit the same area of Louisiana where Hurricane Laura landed only six weeks ago. New Orleans, which will likely miss the storm, was still preparing for the possibility of tornadoes. Louisiana Gov. John Bel Edwards declared a state of emergency. Mississippi Gov. Tate Reeves also declared a state of emergency, with forecasters saying southern Mississippi could see heavy rain and flash flooding.
Residents from eastern Texas to the Florida Panhandle should prepare for Hurricane Delta, which is forecast to make landfall in Louisiana on Friday, October 9.
The National Hurricane Center (NHC) warns Delta’s impacts will include destructive winds, torrential rain, life-threatening storm surge, flash flooding, isolated tornadoes and widespread power outages.
Delta may intensify to a Category 3 storm as it approaches the U.S.’s Gulf Coast states. The region will begin to experience the storm’s impacts on Thursday, October 8.
In what has become the second most active Atlantic hurricane season on record with 25 named storms (there were 27 in 2005), Delta will be the fifth hurricane and record-setting 10th tropical cyclone to make landfall in the continental U.S. this year. Previous 2020 landfalls include Hurricanes Hanna, Isaias, Laura and Sally, and Tropical Storms Bertha, Beta, Cristobal, Fay and Marco.
Preparedness tips for Alabama, Florida, Louisiana, Mississippi, and Texas residents who may be impacted by Delta:
Make sure your hurricane kit includes a minimum seven-day supply of non-perishable food and drinking water (one gallon per person, per day) for all family members and pets, as well as a one-week supply of medications for everyone in your household. Also include COVID-19 safety supplies such as two face coverings per person and hand sanitizer
Write down the name and phone number of your insurer and insurance professional and keep this information either in your wallet or purse
Purchase emergency supplies, such as batteries and flashlights
Prepare your yard by removing all outdoor furniture, lawn items, planters and other materials that could become airborne in high winds
Fill your car’s gasoline tank because long gas lines and fuel shortages often follow in areas impacted by a storm
Damage caused by hurricanes and tropical cyclones are covered under different insurance policies. Wind-caused property damage is covered under standard homeowners, renters and business insurance policies. Renters’ insurance covers a renter’s possessions while the landlord insures the structure.
Property damage to a home, a renter’s possessions, and a business – resulting from a flood – is generally covered under FEMA National Flood Insurance Program (NFIP) policies, if the homeowner, renter or business has purchased one. A growing number of private insurers also offer flood insurance.
Private-passenger vehicles damaged or destroyed by either wind or flooding are covered under the optional comprehensive portion of an auto insurance policy.
Triple-I has additional hurricane and flood preparedness resources:
Hurricane Delta is strengthening rapidly as it heads for Cancun, Mexico. It’s expected to reach Louisiana by Saturday morning. If the storm makes U.S. landfall, it will become the 10th named storm to do so this year – a new record.
Louisiana Governor John Bel Edwards warned coastal parishes to prepare for the storm now. “It is common for many people to experience hurricane fatigue during a busy season, but we need everyone to take this threat seriously,” he said.
Other states along the northern Gulf Coast expected to be impacted include Mississippi, Alabama and Florida.
Please click on the links below for Triple-I’s hurricane preparedness guides:
The outer bands of Tropical Storm Beta are lashing the Texas coast but official landfall is forecast to be late this evening. Beta is also bringing tropical storm conditions to parts of the southwestern Louisiana coast where 2 to 4 feet of storm surge is possible.
The storm is going to bring heavy rainfall to areas that were hit by Hurricane Laura.
High tide on Tuesday could bring “life-threatening storm surge” in areas of Texas and Louisiana, according to the National Hurricane Center (NHC). “Persons located within these areas should take all necessary actions to protect life and property from rising water and the potential for other dangerous conditions,” NHC said. “Promptly follow evacuation and other instructions from local officials.”
The storm could also create tornadoes near the middle-to-upper Texas coast or the southwestern Louisiana coast, NHC said.
Please click on the links below for Triple-I’s hurricane preparedness guides:
“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.