Tag Archives: Hurricanes

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.  

A Better Tool to Predict Impact of Hurricanes? 


Minimum sea level pressure can predict the scope of a storm’s  damage — including from storm surge, not just wind — and be more accurately measured in real time.

The more accurately experts can predict an impending storm’s impact, the better prepared individuals, communities, and businesses can be to soften the blow and bounce back. A recent paper published in the Bulletin of the American Meteorological Society suggests an underutilized tool may be better at predicting hurricane damage than the traditionally used “maximum sustained wind speed.”

Atlantic hurricanes have a long history of financial impact. During 2017-18, hurricanes Harvey, Irma, Maria, Florence, and Michael combined to cause more than $345 billion (U.S.) in direct economic damage.  The Saffir-Simpson Hurricane Wind Scale categorizes only the hurricane wind threat – not the totality of impacts, including storm surge and rainfall.

According to the paper,  several scales have been proposed to replace Saffir-Simpson, but most aren’t easily calculated in real time, nor can they be reliably calculated historically. For example, “storm wind radius” datasets extend back only about 30 years. 

Minimum sea level pressure (MSLP), the paper finds, is a better predictor of the scope of a storm’s  damage and can be more accurately measured in real time, “making it an ideal quantity for evaluating a hurricane’s potential damage.”

MSLP is the lowest pressure recorded in a hurricane.  It occurs at the center of the storm and is part of the large-scale structure of a hurricane’s vortex. Because winds are generated by differences in  barometric pressure between the hurricane’s eye and its perimeter, lower pressure is typically associated with stronger winds.  Also, if two hurricanes have the same wind speed, the one with the lower pressure typically will cover a greater area, potentially posing greater storm surge risk.

“With aircraft reconnaissance, MSLP can be reliably calculated,” the paper says. It’s also much easier to measure at landfall than is maximum sustained wind speed.

“Barometers are among the simplest meteorological instruments and will usually operate in a wide range of conditions,” the report says. Anemometers, which measure wind speed, “are prone to mechanical failure…precisely when they matter most.”

The paper was authored by Colorado State University atmospheric scientist Dr. Philip J. Klotzbach — a Triple-I non-resident scholar — along with scientists from the National Oceanic and Atmospheric Administration (NOAA), North Carolina State University, the University Corporation for Atmospheric Research, and insurance broker Aon.


Coastal resilience, or putting an insurance policy on nature

Our earlier post Working with nature to build resilience to hurricanes discussed how insurers look to natural infrastructure like coastal wetlands and mangrove swamps to mitigate storm losses.

The Mesoamerican Reef, which runs south for some 700 miles from the tip of the Yucatán Peninsula protects coastal communities and property by reducing  the force of storms, but its corals require continued repairs.

For every meter of height the reef loses, the potential economic damage from a major hurricane triples, according to The Nature Conservancy (TNC).

Now thanks to TNC and Swiss Re, the reef is about to get its own insurance policy.

From Bloomberg:

“After Hurricane Wilma struck in 2005, causing $7.5 billion of damage in Mexico, beachfront hotel owners began paying extra taxes to the state government to handle beach restoration and protect the reef.”

TNC has proposed a different approach:

“The extra money paid by the hotel owners to the government could be converted into premium payments to Swiss Re to cover the reef. The policy would be what’s called parametric insurance, in which a large hurricane would trigger near-immediate payouts. By having the money arrive quickly, reef repairs could begin sooner.”

From Artemis blog, via TNC:

“One of the most promising new developments to maximize the value of nature is the possibility of putting an insurance policy on habitats like reefs and beaches. By combining insurance and new science, we can protect and improving the health of reefs and beaches so they can continue to protect us.”

 

Storm surge and flooding top of minds this hurricane season

Nearly 6.9 million homes along the Gulf and Atlantic coasts have the potential for storm surge damage with a total estimated reconstruction cost value (RCV) of more than $1.5 trillion.

But it’s the location of future storms that will be integral to understanding the potential for catastrophic damage, according to CoreLogic’s 2017 storm surge analysis.

That’s because some 67.3 percent of the 6.9 million at-risk homes and 68.6 percent of the more than $1.5 trillion total RCV is located within 15 major metropolitan areas.

“A low intensity storm in a population dense, residential urban area has the ability to do significantly more damage than a higher intensity hurricane along a sparsely inhabited coastline.”

The metro area that includes Miami, Fort Lauderdale and West Palm Beach continues to have the greatest number of at-risk homes (784,000) and an RCV of $143 billion.

On the other hand, the New York metro area has slightly fewer homes at risk (723,000), but a much higher RCV of $264 billion due to high construction costs and home values in this area.

CoreLogic’s analysis also shows local areas along the coasts are susceptible to potential damage that could exceed $1 billion for a single event.

Storm surge and other flooding is on the minds of many in 2017 as Congress considers reauthorization of the National Flood Insurance Program (NFIP), CoreLogic says.

Working with nature to build resilience to hurricanes

Strong buildings, levees and seawalls play an essential role in increasing resilience to floods and hurricanes, but insurers are also looking to natural infrastructure to mitigate storm losses.

As the 2017 Atlantic hurricane season officially begins, an ongoing effort by insurers, risk modelers, environmental groups and academics is focused on understanding how natural defenses like coastal wetlands and mangrove swamps can reduce the impact of storms.

A 2016 study led by researchers at the University of California, Santa Cruz, the Nature Conservancy and the Wildlife Conservation Society, found that more than $625 million in property losses were prevented during Hurricane Sandy by coastal habitats in the Northeast.

Where wetlands remain, the average damage reduction from Sandy was greater than 10 percent. Researchers expect analysis of the effects of Hurricane Matthew will demonstrate the value of similar protections.

The study was conducted in association with Risk Management Solutions and Guy Carpenter, with funding from the Lloyd’s Tercentenary Research Foundation and additional support from the Science for Nature and People Partnership.

Business Insurance has more on this story here.

This is just one example of how reinsurers and insurers collaborate with different sectors to build resilience and mitigate storm damage.

For example, Swiss Re is working with the Nature Conservancy to explore the economics of nature-based coastal defenses.

I.I.I. CEO Sean Kevelighan writes about how the insurance industry collaborates with different groups to build resilience to natural disasters in this article on PC360.

Check out I.I.I. issues update Climate Change: Insurance Issues.

Atlantic Hurricane Season: The Long View

As the 2016 Atlantic hurricane season officially draws to a close just days after Hurricane Otto became the latest calendar year Atlantic hurricane on record to make landfall, the question on everyone’s lips is: are the seasons growing longer?

For if Otto, which struck southern Nicaragua as a Category 2 over Thanksgiving, is the last hurricane of the 2016 season, it will mark the end to the longest hurricane season on record the Atlantic Ocean has seen, according to NOAA.

The 2016 season had an early beginning—well ahead of its June 1 official start—when Hurricane Alex became the first Atlantic hurricane in January since Hurricane Alice in 1955.

At 75 knots, Alex was also the second strongest Atlantic hurricane on record in January, after 1955’s Alice at 80 knots, according to the 2016 season summary by Phil Klotzbach, head of Colorado State University’s Tropical Meteorology Project.

Regardless of whether this points to any long-term trend, it does appear that residents in hurricane-prone areas should keep an eye on the tropics year-round, not just in the June 1-November 30 window.

In the end, the 2016 Atlantic hurricane season was somewhat above average. As CSU’s summary outlines:

“The season was characterized by somewhat above-average named storms and major hurricanes, with slightly above-average hurricane numbers.”

The final tally was 15 named storms, including seven hurricanes, of which three were major hurricanes.

Three tropical storms (Bonnie, Colin and Julia) and two hurricanes (Hermine and Matthew) made U.S. landfall this year, according to NOAA.

There were a number of key takeaways, according to CSU, not least that a total of 78.25 named storm days and 26.25 hurricane days occurred in 2016—the most in an individual Atlantic hurricane season since 2012.

The 9.75 major hurricane days that occurred in 2016 are also the most in a single Atlantic hurricane season since 2010.

Florida’s record-long hurricane drought at 3,966 days ended when Hermine made landfall in the Big Bend of Florida on September 2.

Meanwhile, Matthew became the first Category 5 hurricane in the Atlantic basin since Felix (2007).

No major hurricanes made United States landfall in 2016, although Hurricane Matthew came within about 50 miles of breaking this streak, CSU notes:

“The last major hurricane to make U.S. landfall was Wilma (2005), so the U.S. has now gone 11 years without a major hurricane landfall. The U.S. has never had another 11-year period without a major hurricane landfall since records began in 1851.”

Check out I.I.I. facts and statistics on hurricanes here.

Hawaii, Florida, Georgia and North Carolina Prepare for Storms

With numerous tropical systems in the Atlantic and two major hurricanes (Madeline and Lester) threatening Hawaii in the Pacific, insurers are keeping a close watch to see how things develop.

Over at Wunderblog, Dr. Jeff Masters observes that the dual scenario of two major hurricanes heading towards Hawaii is unprecedented in hurricane record keeping.

Hurricane Madeline, the closer of the two to Hawaii, intensified rapidly, growing from tropical storm to Category 3 strength in just 24 hours, Dr. Masters notes, and has since intensified to Category 4.

While the forecast models are not conclusive on the exact tracks and intensity of these named storms, it’s clear that both Hurricane Madeline and Hurricane Lester could affect Hawaii with high surf, torrential rain, and potential winds over the next week.

Hawaii’s costliest hurricane, based on insured property losses, was Hurricane Iniki in September 1992. Iniki caused $1.6 billion in damage when it occurred, or $2.7 billion in 2014 dollars, according to the Insurance Information Institute (I.I.I.).

Check out the I.I.I.’s Hawaii Hurricane Insurance Fact File for more information, including the top writers of homeowners, commercial and auto insurance.

Meanwhile, on the U.S. Atlantic coast, a tropical storm warning is in effect for the coast of North Carolina from Cape Lookout to Oregon Inlet for tropical depression eight.

A second system—tropical depression nine— is also being closely watched in the Gulf of Mexico. In its latest public advisory, the National Hurricane Center says the system is set to strengthen and that interests in central and northern Florida, and southeastern Georgia should monitor its progress.

Screen Shot 2016-08-30 at 8.29.16 AM

I.I.I.’s Florida insurance representative Lynne McChristian offers some sound advice on making sure your property insurance is ready for named storms in her latest blog post.

Take a look at I.I.I.’s North Carolina Hurricane Insurance Fact File, Georgia Hurricane Insurance Fact File, and Florida Hurricane Fact File for more information.

Top Metro Areas Have More to Lose When a Hurricane Hits

Latest Atlantic hurricane season forecasts are focused on the numbers – how many storms can we expect? and how many of those will be major hurricanes? NOAA, Colorado State University and Tropical Storm Risk cast their predictions here, here and here.

But as the latest storm surge analysis from CoreLogic indicates, it is where a hurricane hits land that is often a more important factor than the number of storms that may occur during the year.

Why?

More than 6.8 million homes located along both the Gulf and Atlantic coasts of the United States are at risk of hurricane-driven storm surge, with a total reconstruction cost value (RCV) of just over $1.5 trillion, according to CoreLogic.

But the disproportionate numbers of at-risk homes in just 15 major metropolitan areas means that where the storm makes landfall can make all the difference in terms of property damage and loss of life.

15metroareas

CoreLogic’s analysis reveals that some 67 percent of the 6.8 million total at-risk homes and 68 percent of the total $1.5 trillion RCV is located within 15 major metropolitan areas.

That’s 4.6 million homes, with total RCV of just over $1 trillion located in urban centers along the Gulf and Atlantic coasts including Miami, New York City, New Orleans, Houston, Philadelphia, Charleston and Boston.

The Miami metro area, which includes Fort Lauderdale and West Palm Beach, tops the list with 780,482 at-risk homes and an RCV of $143.9 billion.

By comparison, the New York City metro area has slightly fewer homes with potential storm surge risk at 719,373, but a significantly higher RCV totaling $260.2 billion.

As CoreLogic says:

“History has shown us that a single low-level storm can cause substantial property loss and potential loss of life it it occurs in or near an area of dense development.”

It’s important to note that properties located outside of designated FEMA flood zones may still be at risk for storm surge inundation.

However, only homes located within FEMA-designated high risk flood areas are required to carry flood insurance through the National Flood Insurance Program.

A 2015 poll by the Insurance Information Institute found that 14 percent of American homeowners had a flood insurance policy. This percentage has been at about the same level every year since 2009.

Atlantic Hurricane Season Off to Early Start

Whichever way you slice it, NOAA’s just-released outlook for the 2016 Atlantic Hurricane Season appears to suggest we’re on track for more hurricane activity than we’ve seen in a while.

NOAA predicts a 70 percent chance of 10 to 16 named storms (winds of 39 mph or higher), of which 4 to 8 could become hurricanes (winds of 74 mph or higher), including 1 to 4 major hurricanes (Category 3, 4 or 5; winds of 111 mph or higher).

It calls for a 45 percent chance of a near-normal season, but there is also a 30 percent chance of an above-normal season. The likelihood of a below-normal season is at 25 percent.

NOAA2016AtlanticHurricaneOutlook

In the words of Dr Gerry Bell, lead seasonal hurricane forecaster with NOAA’s Climate Prediction Center:

“This is a more challenging hurricane season outlook than most because it’s difficult to determine whether there will be reinforcing or competing climate influences on tropical storm development.

“However, a near-normal prediction for this season suggests we could see more hurricane activity than we’ve seen in the last three years, which were below normal.”

To put that in context, the 2012 Atlantic hurricane season was extremely active and tied with 1887, 1995, 2010 and 2011 for having the third-most named storms on record.

Insurers paid out more than $26 billion in hurricane losses that year, including Superstorm Sandy which caused $19 billion in insured property losses.

With Bonnie threatening to develop into a tropical storm over the Memorial Day weekend, the Atlantic could have its second storm before the official start of hurricane season, which starts June 1, as the Insurance Information Institute reminds us here.

Bear in mind that NOAA’s outlook includes Hurricane Alex, a pre-season storm that formed over the far eastern Atlantic in January.

With El Niño dissipating, NOAA’s Climate Prediction Center forecasts a 70 percent chance that La Niña— which favors more hurricane activity — will be present during the peak months of hurricane season, August through October.

However, current model predictions show uncertainty as to how strong La Niña and its impacts will be.

Check out this earlier post over at Artemis blog about the potential impact of La Niña.

As we’ve said before, regardless of predictions and outlooks it pays to be prepared and this year’s hurricane season is no different.

Check out I.I.I. facts and statistics on hurricanes.

Hurricane Season: It’s A Wrap

As the 2015 Atlantic hurricane season draws to a close, there’s a lot of talk about how the hurricane forecasters got it right this year, due to a strong El Niño.

Over at the Capital Weather Gang blog, Phil Klotzbach, lead author of the Colorado State University (CSU) hurricane forecasting team, writes that all of the forecasting groups predicted a moderate to strong El Niño event this year, and this turned out to be correct.

Klotzbach observes:

In general, seasonal forecasts did a good job anticipating a below-average Atlantic hurricane season in 2015 due to a strong El Niño event. Most seasonal forecasts predicted a bit less activity than was observed, due to a surprising warming of the tropical Atlantic during the peak of hurricane season this year.”

So what are the key takeaways?

The final tally for the 2015 season was 11 named storms, four hurricanes and two major hurricanes.

No major hurricanes made U.S. landfall in 2015, which means the U.S. has now gone 10 years without a major hurricane landfall. Hurricane Wilma (2005) was the last, according to CSU’s report on the 2015 season.

Still, it’s important to point out that moisture from Hurricane Joaquin–the first Category 4-5 hurricane to impact the Bahamas during October since 1866–contributed to a weather system that led to catastrophic floods across much of South Carolina resulting in more than $2 billion in total economic losses.

The CSU team of Klotzbach and William Gray also reminds us that while the Atlantic has seen a large increase in major hurricanes during the recent period of 1995-2015 (average 3.4 per year) compared with the prior 25-year period of 1970-1994 (average 1.5 per year), the U.S. has been fortunate that few major hurricanes have made U.S. landfall–except during the two very damaging years of 2004-2005.

Consider this lucky statistic:

The Atlantic basin has had 27 major hurricanes since Wilma, with no major hurricane landfalls. The 20th-century average is that approximately 30 percent of all major hurricanes forming in the Atlantic make U.S. landfall.”

Check out I.I.I. facts and statistics on hurricanes here.