Hurricane Hanna, 2020’s first Atlantic basin hurricane, made landfall during the late afternoon of Saturday July 25 as a Category 1 storm on the Corpus Christi, Texas, coast. It struck Padre Island with winds of 90 mph.
The Corpus Christi area dodged the hurricane’s heavier rain bands, but the storm still caused significant flooding and damage. Thousands were without power late July 26 as crews worked overtime to make repairs and Texas Governor Greg Abbott issued an emergency declaration for 32 counties.
By Sunday evening, the storm was downgraded to a tropical depression, with maximum sustained winds of 35 mph, and was slowly dying over the mountains of northern Mexico.
CoreLogic, a real estate data analytics provider, estimated that over 14,000 homes are at risk from Hurricane Hanna’s storm surge.
Flood damage to a home, a renter’s possessions, or a business is generally covered under FEMA National Flood Insurance Program (NFIP) policies, if the homeowner, renter, or business has purchased one. Several private insurers also offer flood insurance.
The Insurance Information Institute (Triple-I) yesterday hosted a webinar showcasing technology companies whose products mitigate the impact of severe weather on homeowners, businesses and communities. This is the first in a series of Lightning Rounds – fast-paced pitch panels for insurance and non-insurance investors.
The webinar is part of the Resilience Accelerator initiative, a collaboration of Triple-I, ResilientH2O Partners and The Cannon.
During the Lightning Rounds, pre-vetted technology companies, equipment suppliers, integrated solution providers, and large-scale project development teams present their unique value propositions.
This Round’s focus was flood prevention. Shelly Klose, CEO of True Flood Risk described the company’s AI-driven risk management platform that provides individual property data, geolocation intelligence and risk scores related to flood risk in real-time without an on-site inspection. Tasha Nielsen Fuller, CEO of FloodFrame USA, presented a system which is installed underground around a structure, and automatically deploys in a flood, protecting the structure. Rahel Abraham, Founder and Chief Executive Officer of ClimaGuard, was inspired to invent a water-resistant wrapping for vehicles and other possessions when her own vehicle was flooded during Hurricane Harvey.
To view a recording of the webinar click on the video above.
Webinar overview
Part 1: A view from the C-Suite: Identifying the right technology and risk solutions
Brian Gaab, Strategy & Innovation, CSAA Insurance Group, a AAA Insurer
Susan Holliday, Senior Advisor, International Finance Corporation | The World Bank Group
Matthew T. Schneider, Co-CEO, Aon Risk Solutions, M&A and Transaction Solutions
Michel Leonard, PhD, CBE (Moderator), Senior Economist & Vice President, The Insurance Information Institute
Part 2: Use Cases: Bringing to market flood management solutions
Presenting Companies:
Shelly Klose, Founder and Chief Executive Officer, True Flood Risk
The economic uncertainty brought about by COVID-19 has impacted the U.S. insurance industry’s investment portfolios this year yet insurers cumulatively entered 2020 in a strong financial condition, according to a just-released Insurance Information Institute (Triple-I) Economic Snapshot report.
“The good news is the industry is well positioned to provide the safety net we need,” said Dr. Steven Weisbart, Chief Economist and Senior Vice President, Triple-I. “We recognize there’s been deterioration in investment income during the past few months, but the industry was financially strong before the pandemic hit. If a vaccine is discovered, most economists believe the economy will have little trouble bouncing back. Until then, it’s just going to be a longer process than we originally thought.”
The financial fortunes of the U.S.’s property/casualty (P/C) insurers are generally tied to the U.S.’s Gross Domestic Product (GDP) as auto, home, and business (e.g., construction, workers compensation (w/c)) activity are reflective of the economy’s overall health.
Weisbart says while a combination of government restrictions and personal fear is delaying economic recovery, the insurance industry has been able to provide some relief and flexibility for its private-passenger auto insurance policyholders. More than $14 billion in premium relief had been offered to the nation’s drivers in 2020 as of the end of May, a Triple-I analysis found, and insurers continue to monitor the claims experience of motorists.
The Triple-I report shows some additional positive news for insurers. For example, during the past four years the number of owner-occupied homes has risen following a decade during which there was no increase. This is significant for the P/C insurance industry because virtually every owner-occupied home has homeowners insurance while only about half of renters buy renters insurance.
Pandemic-related changes may also affect workers compensation insurance as some states consider changes to the way w/c claims are processed for front-line workers, such as those in health care and law enforcement. On the other hand, some economists suggest w/c claims may experience a decrease due to the number of people working from home.
The Economic Snapshot’s special topic section focuses on life insurance. Although this sector generated its largest pre-tax operating loss of any quarter in at least 18 years, deaths due to the COVID-19 virus weren’t responsible. Instead, the plunge in interest rates was so steep and is expected to last so long that the industry booked an unprecedented increase in aggregate reserves. Reserves rose to $103.5 billion—a $57 billion increase since the third quarter of 2019.
A copy of the 2Q 2020 P/C Industry Economic Snapshot is available to Triple-I members by logging into the members-only portal at www.iii.org. Please contact members@iii.org for log in instructions, or information about membership.
The 2020 Atlantic hurricane season activity is still projected to be “well above average,” according to Triple-I non-resident scholar, Dr. Phil Klotzbach.
Dr. Klotzbach, an atmospheric scientist at Colorado State University (CSU), and his team issued an updated forecast on July 7. They project the 2020 Atlantic hurricane season will have 20 named storms (up from 19 in the previous forecast),nine hurricanes, and four major hurricanes.
The 20 named storms include the storms that have already formed. An average season has 12 named storms, six hurricanes and three major hurricanes.
The active season is driven in part by low odds of El Niño conditions in the summer/fall and well above average sea surface temperatures in the tropical Atlantic. The warm waters fuel tropical cyclones.
Please click on the links below for Triple-I’s hurricane preparedness guides:
By Dr. Steven Weisbart, Chief Economist, Insurance Information Institute
The U.S. Energy Information Administration (EIA) publishes extensive data on petroleum production, refining and supplies to users, with some data provided on a weekly basis. Gasoline supplied to retailers is not quite the same as gasoline consumed but it is close. And gasoline consumed is not exactly the same as miles driven but it is close. Consequently these data can indicate how much people are driving, sooner than we get data on the frequency and severity of collisions. Still, one benefit of tracking these data is that they are published in a timely way.
As a baseline, consider gasoline supplied in the first 12 weeks of 2020, compared to the comparable weeks in 2019 (Figure 1). Although this comparison can be affected by changes in prices from year to year as well as changes in weather (and possibly other differences between the two periods), we can assume that these differences are small and do not obscure longer-term trends.
The graph shows some week-to-week variation, but basically the same—or maybe a little less—gas supplied in 2020 vs. 2019.
Then the pandemic—and the start of the recession caused by fighting it—happened. Driving was sharply curtailed, and auto insurers instituted programs for refunding premiums to reflect this change. Figure 2 adds to Figure 1 the percentage change in year-over-year supplies of gas for the rest of March and all of April 2020.
But in May some states began relaxing various restrictions, and driving began to return to near-pre-pandemic/recession levels, as Figure 3 shows.
At this point there is no way to know what caused this spike in gas usage, but some speculate that any or all of the following could be responsible:
• States are moving to more permissive stages of lockdown, resulting in more travel, especially to beaches and other outdoor activities
• People who once took public transportation are now choosing to drive, thereby lessening exposure to the virus that might result from travel on mass transit
• Warmer weather months are traditionally a time for more driving
• The price of gas continues to be unusually low, making driving less burdensome than the prior year.
By Dr. Steven Weisbart, Chief Economist, Insurance Information Institute
Dr. Steven Weisbart
The employment report for June 2020 just released by the U.S. Bureau of Labor Statistics, has some interesting numbers. I’m not referring to the national employment numbers but to the May employment numbers for the insurance industry.
You might remember that the May numbers for the national economy were dreadful. The unemployment percentage was 13.3 percent. The comparable numbers for subsets like the property/casualty (P/C) insurance industry aren’t released until a month later, but those numbers for these subsectors became available today. Note that the May numbers are preliminary and are often revised, though slightly, in subsequent months.
In May, preliminary P/C insurance carrier employment shed the 2,700 jobs that had been gained in April. P/C carrier employment has been effectively flat at 559,000 since February 2020—remarkable in relation to most other sectors of the economy.
Life/annuity carriers gained 300 jobs in May, for total employment of 350,000—essentially flat since January 2019 (with some few large month-to-month changes that net to roughly zero).
Surprisingly, health (mainly medical expense) carriers lost 3,200 jobs in May, following a loss of 2,500 (revised upward) jobs in April. This might be explained by the cessation of services like elective surgery and fewer visits to emergency departments (a recent CDC report showed a drop of roughly 25 percent in visits for heart attacks and strokes in April and May).
Insurance brokerage and agencies gained 1,500 jobs in May after having lost 10,500 jobs (revised) in April. I suspect that the May agent/brokerage numbers will be revised upward next month, in part due to participation in the Paycheck Protection Program.
It looks like the insurance industry is doing its part to keep the economy running.
Today marks one year when my car got flooded, I got stranded, and I learned a huge lesson: I call it my floodiversary.
We keep a small saltwater tank, and to keep the tank healthy, it needs regular water changes. Before the Fourth of July weekend I decided to swing by the local fish store and pick up 5 gallons of water to replenish the tank. That way I could get the chores out of the way in order to relax and enjoy the rest of the holiday weekend.
I got to the store in time and picked up a five-gallon industrial container. I put it in the back, put the hatch down and started the 30-minute trip home. About halfway there, I made a turn. That’s when the trouble started. The car began to lose power. Fortunately I was able to pull over. I tried to start the car. Nothing. A new car…why? Then it occurred to me: the %$@*& water. I went to the back, opened the hatch and sure enough, my trunk had about an inch of water gently sloshing back and forth. I started to try and scoop the water out with the bucket, but it was impossible.
I went back to the car, got in and left the door open and started to assess my options. It was sweltering–about 90 degrees; I was in the middle of nowhere and had spotty cell service. I let my family know where I was and tried to connect to my car’s emergency system. After many tries and fails, and even speaking to an engineer, it was clear the car was not going to start up again. So I waited for the tow truck and my husband, as I swatted mosquitoes and thought about cold drinks and air-conditioning.
The tow truck arrived from the dealership, but the guy was in a hurry. He refused to let me ride back with him, but it was a war of wills. I was determined not to be left on the side of the road, so I stalled by asking him questions until my husband pulled up. We both watched as the car was raised on the flatbed, with water streaming out the back. It was a holiday weekend, so the car would have to sit on the lot in the heat all weekend. My husband had brought a stack of towels, so we did what we could. We looked at each other. No more water in the car.
On the ride back home I called my insurer. They couldn’t do much over the weekend but would be back in touch after the holiday. The next week I got the call. After the deductible was met, the damage was all covered—about $4,500 all in. My insurance also covered the cost of a rental car. The adjuster assured me the car would be fine; it turns out the water had shorted out a panel located in the trunk of the car that connected to its “brain.” But after the ordeal, it was a relief to know the car would be ok and ready to drive after a few days. The adjustor had been pleasant and helpful. “I got to tell you,” he said, “I’ve seen flooding before. But I’ve never seen a car flooded from the inside.”
As towns cancel fireworks celebrations because of the coronavirus pandemic, many more backyard and neighborhood fireworks displays will likely take place on July Fourth.
In New York City, more than 12,500 calls were made to 911 for illegal fireworks in June alone – roughly 12 times the number of comparable calls received in the first six months of 2019.
Though fireworks are legal in some form in most states, they can be very dangerous when not handled by professionals. According to the National Fire Protection Association, fireworks caused 19,500 fires in 2018. A recent wildfire in Utah that prompted the evacuation of 100 homes was attributed to fireworks.
And nearly 4,900 Americans go to the emergency room with fireworks-related injuries during the first eight days of July, according to the Pew Research Center.
The video above explains the insurance coverage available for fireworks-related damage or injury. For example, if a neighbor’s fireworks damage your home, their homeowners policy should cover you. But if you are setting off illegal fireworks, remember: homeowners insurance doesn’t usually cover accidents caused by illegal actions.
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.
Insurers refunded $1.2 billion to California policyholders as of June 26, according to actuarial firm Perr & Knight.
The California Department of Insurance (CDI) ordered the refunds to drivers and businesses in the state affected by the COVID-19 emergency. The companies were required to file reports outlining the details of their response to COVID-19.
CDI recently made these reports public, and Perr & Knight, which specializes in rate filings, published an analysis. Here are some key takeaways:
California’s reports have information on the number and percentage of policyholders affected. If the state is a guide, EVERY person with a personal auto insurance policy got a break on premiums, as well as millions of other policyholders, according to James Lynch, Triple-I’s chief actuary.
Private auto insurance customers received the largest share of the refunds – a little over $1 billion. Commercial auto customers received about $33 million in refunds, and workers compensation customers received $82.7 million.
Commercial multi-peril clients received $11.2 million, commercial liability $7.2 million and medical malpractice $10.3 million.
The reports also have data on payment deferrals (grace periods), which is something that has been underrecognized, in part because it was so hard to quantify.
