I was in New Orleans last week speaking at a Louisiana Department of Insurance conference marking the 10th anniversary of Hurricanes Katrina and Rita, writes Insurance Information Institute (I.I.I.) chief actuary James Lynch.
State Insurance Commissioner Jim Donelon (pictured below) organized the conference to emphasize how the state’s property insurance market “is more competitive and more viable than it was the day before Hurricane Katrina.” The state sought private market solutions to keep the marketplace vibrant in the wake of more than $25 billion in insured losses.
Louisiana adopted a statewide building code so structures would be better able to withstand a hurricane. It abolished its politically appointed Insurance Rating Commission, which made it easier for insurers to charge fair premiums. And the state carefully winnowed customers out of its insurer of last resort, Louisiana Citizens Property Insurance Corp. Citizens’ market share soared after the 2005 hurricane season, approaching 10 percent by 2008. By 2014, its market share had fallen to 1.8 percent.
I spoke on a panel about the state’s property insurance markets operate today. I tried to emphasize how Louisiana’s experience shows the importance of adequate insurance. We also talked about alternative capital and how it is shaping the pricing of catastrophe reinsurance, a topic I.I.I. has discussed here.
Over the next few weeks, you will be seeing a lot of media coverage of the 10th anniversary of Hurricane Katrina. Here are some notable links:
- The New Orleans Times-Picayune won a Pulitzer Prize for its coverage. The paper recaps that work and adds an up-to-date perspective here (h/t to I.I.I.’s Diane Portantiere for the link).
- NPR is pouring out audio reports this month on Hurricane Katrina: 10 Years of Recovery and Reflection.
- Forbes contributor Marshall Shepherd talked to meteorologists who noted how forecasting has improved in the past 10 years. Lots of interesting insights, including Colorado State University hurricane expert Phil Klotzbach, who sadly notes that a well-forecast hurricane like Katrina still resulted in more than 1,500 deaths. Klotzbach wondered how many survivors of Category 5 Hurricane Camille in 1969 reasoned that Cat 3 Katrina “would be a piece of cake.” I can confirm that Mississippi Governor Haley Barbour, in his tick-tock memoir about the storm and its aftermath, constantly referred back to his Camille experience — until he saw Katrina’s devastation. Tragically, the breadth and height of Katrina’s storm surge were unprecedented.
- Barbour’s was one of many books published to coincide with the anniversary. The New York Times Book Review on August 7 featured New Orleans works, including a review of “Katrina: After the Flood,” about the city’s recovery, and a roundup of works examining the tragedy from racial, social and cultural perspectives.
- Business Insurance discusses how catastrophe models have improved in the past 10 years, particularly in the quality of the input the models receive:
- For example, casino barges moored on the Mississippi Gulf coast, badly damaged in Katrina’s storm surge, often were wrongly classified as normal buildings, said Jayanta Guin, executive vice president at Boston-based catastrophe modeler AIR Worldwide. Now, modelers have better data on the construction characteristics, occupancy, height and other aspects of individual buildings, he said.
- Global Insurer Allianz used the anniversary to draw on its own database of major business insurance claims worldwide to examine trends in catastrophe losses, particularly (but not exclusively) marine losses. Its report, released August 18, points to these lessons learned:
- Storm surge can cause more damage than high winds. Storm surge has been a contributing factor in half of the costliest U.S. storms.
- Levees in the United States need improvement, even after the rebuilding of New Orleans’ levees after Katrina.
- Most wind damage occurred “to the building envelope” — roof, walls, windows.
- Demand surge can not only affect the price of materials and workers, post storm, it can affect the quality of materials, as we famously saw with drywall that created a new set of issues.