Category Archives: Disaster Resilience

Business Insurance, Business Risk, Catastrophes, Disaster Preparedness, Disaster Resilience, Floods, Insurers and the Economy, Legal Environment

Policyholder Surplus Matters: Here’s Why

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Perhaps the most emotionally compelling data point invoked by those who would compel insurers – through litigation and legislation – to pay business-interruption claims explicitly excluded from the policies they wrote is the property/casualty insurance industry’s nearly $800 billion policyholder surplus.

 Many Americans hear “surplus” and think of a bit of cash they have stashed away for emergencies. And when you consider that nearly 40 percent of Americans surveyed by the Federal Reserve said they would either have to borrow or sell something to cover an unexpected $400 expense – or couldn’t pay it at all – that number may sound like overkill. 

Not as much as you think

But policyholder surplus isn’t a “rainy day fund.” It’s an essential part of the industry’s ability to keep the promises it makes to policyholders. And although a number like $800 billion may raise eyebrows, when we look more closely at its components, the amount available to cover claims turns out to be considerably less.

Insurers are regulated on a state-by-state basis. Regulators require them to hold a certain amount in reserve to pay claims based on each insurer’s own risk profile. The aggregation of these reserves – required by every state for every insurer doing business in those states – accounts for about half the oft-cited industry surplus.

Call it $400 billion, for simplicity’s sake.

Each company’s regulator-required surplus can be thought of as that company’s “running on empty” mark – the point at which alarms go off and regulators start talking about requiring it to set even more aside to make sure no policyholders are left in a lurch.

By extension, $400 billion is where alarms begin going off for the entire industry.

It gets worse – or better, depending on your perspective.

In addition to state regulators’ requirements, the private rating agencies that gauge insurers’ financial strength and claims-paying ability don’t want to see reserves get anywhere near “Empty.” To get a strong rating from A.M. Best, Fitch, S&P, or Moody’s, insurers have to keep even more in reserve. 

Why do private agency ratings matter? Consumers and businesses use them to determine what insurer they’ll buy coverage from. Also, stronger ratings can contribute to lower borrowing expenses, which can help keep insurers’ operating costs – and, in turn, policyholders’ premiums – at reasonable levels. 

So, let’s say these additional reserves amount to about $200 billion for the industry. The nearly $800 billion surplus we started with now falls to about $200 billion.

To cover claims by all personal and commercial policyholders in a given year without prompting regulatory and rating agency actions that could drive up insurers’ costs and policyholders’ premiums.

Which brings us to today.

Losses ordinary and extraordinary

In the first quarter of 2020, the industry experienced its largest-ever quarterly decline in surplus, to $771.9 billion. This decline was due, in large part, to declines in stock value related to the economic recession sparked by the coronavirus pandemic.

Nevertheless, the industry remains financially strong, in large part because the bulk of insurers’ investments are in investment-grade corporate and governmental bonds. And it’s a good thing, too, because the conditions underlying that surplus decline preceded an extremely active hurricane season, atypical wildfire activity, and damages related to civil unrest approaching levels not seen since 1992 – involving losses that are not yet reflected in the surplus.

Insured losses from this year’s Hurricane Isaias are estimated in the vicinity of $5 billion. Hurricane Laura’s losses could, by some estimates, be as “small” as $4 billion or as large as $13 billion.

And the Atlantic hurricane season has not yet peaked.

The 2020 wildfire season is off to a horrific start. From January 1 to September 8, 2020, there were 41,051 wildfires, compared with 35,386 in the same period in 2019, according to the National Interagency Fire Center. About 4.7 million acres were burned in the 2020 period, compared with 4.2 million acres in 2019.

In California alone, wildfires have already burned 2.2 million acres in 2020 — more than any year on record. For context, insured losses for California’s November 2018 fires were estimated at more than $11 billion.

And the 2020 wildfire season still has a way to go.

All this is on top of routine claims for property and casualty losses.

Four billion here, 11 billion there – pretty soon we’re talking about “real money,” against available reserves that are far smaller than they at first appear.

No end in sight

Oh, yeah – and the pandemic-fueled recession isn’t expected to reverse any time soon. Economic growth worldwide remains depressed, with nearly every country experiencing declines in gross domestic product (GDP) – the total value of goods and services produced. GDP growth for the world’s 10 largest insurance markets is expected to decrease by 6.99 percent in 2020, compared to Triple-I’s previous estimate of a 4.9 percent decrease. 

If insurers were required to pay business-interruption claims they never agreed to cover – and, therefore, didn’t reserve for – the cost to the industry related to small businesses alone could be as high as $383 billion per month.

This would bankrupt the industry, leaving many policyholders uninsured and insurance itself an untenable business proposition.

Fortunately, Americans seem to be beginning to get this.  A recent poll by Future of American Insurance and Reinsurance (FAIR) found the majority of Americans believe the federal government should bear the financial responsibility for helping businesses stay afloat during the coronavirus pandemic. Only 16 percent of respondents said insurers should bear the responsibility, and only 8 percent said they believe lawsuits against insurers are the best path for businesses to secure financial relief.

Further Reading:

POLL: GOVERNMENT SHOULD PROVIDE BUSINESS INTERRUPTION SUPPORT

TRIPLE-I GLOBAL OUTLOOK: CONTINUED PRESSURE ON INVESTMENTS & PREMIUMS

BATTLING FIRES, CALIFORNIA ALSO STRUGGLES TO KEEP HOMEOWNERS INSURED

LAURA LOSS ESTIMATES: $4 BILLION TO $13 BILLION

ATYPICAL WILDFIRE ACTIVITY? OF COURSE — IT’S 2020

SWISS RE: A KATRINA-LIKE HURRICANE COULD CAUSE UP TO $200 BILLION IN DAMAGE TODAY

U.K. BUSINESS INTERRUPTION LITIGATION SEEMS UNLIKELY TO AFFECT U.S. INSURERS

RECESSION, PANDEMIC TO IMPACT P/C UNDERWRITING RESULTS, NEW REPORT SHOWS

BUSINESS INTERRUPTION VS. EVENT CANCELLATION: WHAT’S THE BIG DIFFERENCE?

CHUBB CEO SAYS BUSINESS INTERRUPTION POLICIES ARE A GOOD VALUE AND WORK AS THEY SHOULD

TRIPLE-I CHIEF ECONOMIST: P/C INDUSTRY STRONG, DESPITE SURPLUS DROP

INSURED LOSSES DUE TO CIVIL UNREST SEEN NEARING 1992 LEVELS

COVID-19 AND SHIPPING RISK

BUSINESS INTERRUPTION COVERAGE: POLICY LANGUAGE RULES

Disaster Resilience, Insurance Industry, Technology

Disaster Resilience Is Focus of Triple-I, U. Penn Student Competition

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By James Ballot, Senior Advisor, Strategic Communications, Triple-I

For the third year straight, the Insurance Information Institute (Triple-I) and the Wharton Risk Management and Decision Processes Center (Wharton Risk Center) at the University of Pennsylvania are co-sponsoring a student competition aimed at developing innovative solutions to real-world disaster resilience problems.

Held virtually, the third annual “Hack-for-Resilience” begins on Friday, Sept. 11 and concludes on Sunday, Sept. 13 as part of PennAppsXXI, the nation’s oldest student-run hackathon. The word “hack,” in the context of a hackathon, describes how multiple technologies can be used in new and innovative ways.

“This event allows the Triple-I and its Resilience Accelerator partners to bring together insurers and student innovators who have the same goal—to create new products and services that will reduce the risks people face from natural disasters,” said Sean Kevelighan, CEO, Triple-I. The Triple-I’s Resilience Accelerator was launched in 2019 to reduce the impact of extreme weather events on households and communities through insurance. 

The 2020 edition of this competition will give entrants from midnight on Saturday, Sept. 12 through 9 a.m. on Sunday, Sept. 13 to show their skills. During this time, teams of up to four students will conceive, test, and deliver working apps while others develop hardware solutions, Internet of Things (IoT) protocols, and data tools that can save lives and reduce property damage in the wake of a natural disaster.

 “Building resilience to disasters is more important than ever,” said Dr. Carolyn Kousky, Executive Director, Wharton Risk Management and Decision Processes Center, University of Pennsylvania.

A team of judges from Wharton Risk Center and Triple-I will award first- and second-place cash prizes in two categories: “Best Overall Hack” and “The Most Outstanding Application of Insurtech,” which is defined broadly as either a product or service that improves the insurance customer experience. The winning teams will be announced on Sunday evening, Sept. 13.

New to this year’s “Hack-for-Resilience” is that both first-place prize winners will participate in the Resilience Accelerator’s Lightning Round innovation showcase on Thursday, Oct. 22, 2020.

The first-place prizes in 2019 were awarded to the creators of Phoenix, an autonomous drone with the capacity to track and extinguish fires (Best Overall Hack) and WildFire Protect, a parametric insurance product which would pay a policyholder immediately after they incurred a wildfire-related property loss (The Most Outstanding Application of Insurtech).

You can follow this year’s competition on social media via the hashtag #H4R2020

Catastrophes, Disaster Preparedness, Disaster Resilience

Battling Fires, California Also Struggles to Keep Homeowners Insured

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The Los Angeles office of the National Weather Service predicted prolonged, potentially record-setting heat and dangerous weather conditions throughout California this summer – and, some experts expect it to continue for some time beyond.

“If you like 2020, you’re going to love 2050,” said Michael Gerrard, director of Columbia University’s Sabin Center for Climate Change Law, in a recent Los Angeles Times article.

These conditions can only exacerbate this year’s atypical wildfire activity in the state. So, it should be no surprise that California is grappling with how to stop insurers from abandoning fire-prone areas, leaving countless homeowners at risk.

“Years of megafires have caused huge losses for insurance companies, a problem so severe that, last year, California temporarily banned insurers from canceling policies on some 800,000 homes in or near risky parts of the state,” The New York Times reports. “However, that ban is about to expire and can’t be renewed, and a recent plan to deal with the problem fell apart in a clash between insurers and consumer advocates.”

Insurers are widely expected to continue their retreat.

“The marketplace has largely collapsed” in high-risk areas, said Graham Knaus, executive director of the California State Association of Counties. “It’s a very large geographic area of the state that is facing this.”

California, where regulations lean toward consumer protection, is particularly challenged. The state doesn’t let insurers set premiums based on what they expect in future damages. They can only set rates based on prior losses. They also aren’t allowed to pass along reinsurance costs to policyholders – costs that are expected to rise as fire risks worsen.

State lawmakers introduced a bill to let insurers writing coverage in wildfire-prone areas incorporate climate predictions and other costs into their rate requests in return for making coverage more available and offering discounts to people who take steps to reduce their home’s vulnerability.

Insurers supported the change, as did the counties association and the union representing firefighters. But the bill faced strong opposition from consumer groups, who ultimately prevailed. Last month, the state senate stripped most of the provisions from the bill and directed the insurance commissioner to review the current rules and report back to the legislature in two years.

The legislature ended its session without acting on the revised version. Insurance Commissioner Ricardo Lara said his focus now is working with high-risk communities to reduce their wildfire risk enough that insurers will keep offering coverage without big rate increases.

“If Californians do our part to protect homes from wildfire,” Lara said, the industry should respond by agreeing to insure those homes.

Janet Ruiz, Triple-I’s director of strategic communications, said, “Insurers in California are working with legislators and the California Department of Insurance to find solutions to keep homeowners insured in wildfire risk areas. The industry supports mitigation efforts, the California FAIR Plan, and the proposed IMAP program.”

Catastrophes, Disaster Preparedness, Disaster Resilience

Laura Loss Estimates:$4 Billion to $13 Billion

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This blog post has been updated based on new information received since it was first published on September 4, 2020.

Hurricane Laura may have caused as little as $4 billion of insured damage or as much as $13 billion, according to early estimates.

Property information, analytics and data provider CoreLogic said residential and commercial insured losses from Hurricane Laura in Louisiana and Texas will come in at between $8 billion and $12 billion. Most of the property damage occurred in southwest Louisiana, where Laura made landfall early as a Category 4 hurricane with 150 mph winds.

Catastrophe risk modeler RMS puts the range between $9 billion and $13 billion. This includes wind and storm surge losses of between $8.5 billion and $12 billion, inland flood losses of $100 million to $400 million, and National Flood Insurance Program (NFIP) losses of $400 million to $600 million.

Catastrophe risk modeling firm Air Worldwide said it expects losses related to Laura to fall in the $4 billion to $8 billion range. The combination of the storm’s track through less-populated areas and its relatively small “Rmax” – the distance from the center of the storm to the location of the maximum winds – should keep insured losses down somewhat, the company said.

Cat risk modeler Karen Clark & Co. estimates insured onshore property losses from wind and storm surge will likely amount to $8.7 billion in the U.S. and $200 million in the Caribbean. Its estimate includes the privately insured wind and storm surge damage to residential, commercial, and industrial properties and automobiles but not losses covered by the NFIP or losses to offshore assets.

All estimates are subject to change as more information becomes available.

Catastrophes, Disaster Preparedness, Disaster Resilience, Flood Insurance

Hurricane Season:More Than Wind & Water

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Under the best of circumstances, the Atlantic hurricane season is a challenging time. Despite improved forecasting and analytical tools, pre-storm communication, and engineering, hurricane-related losses continue to climb.

But the 2020 season hasn’t come during the best of circumstances. This extremely active season arrived on the heels of a pandemic that hasn’t ebbed, accompanied by civil unrest and atypical wildfire activity that could draw attention and resources away from preparation and post-storm aid.

And, as if that wasn’t enough, it falls in the middle of what is arguably the most contentious, chaotic U.S. election year in modern history.

To say these new variables complicate resilience would be a gross understatement in a year whose (to use the technical insurance phrase) “general weirdness” would be difficult to overstate.

So, in a paper published today we review the current state of hurricane resilience – how forecasting, modeling, preparation, and mitigation have evolved – and how the insurance industry is working to help communities bounce back from hurricanes.

Demographics more than climate change

Nine of the 10 costliest hurricanes in U.S. history have occurred since 2004, and 2017, 2018, and 2019 were the largest back-to-back-to-back insured property loss years in U.S. history. Many would instinctively chalk up such numbers to climate change. But a careful look at the data suggests climate change isn’t the predominant driver of losses.

U.S. Census Bureau data indicate that the number of housing units in the United States increased most dramatically since 1940 in areas that are most vulnerable to weather-related damage. They also show that new homes are bigger and more expensive than in past decades.

Bigger homes full of more valuables, more cars and infrastructure in disaster-prone locales – these, more than climate trends, seem to be the dominant factors driving losses.

Not more, but wetter

Hurricanes may not be more frequent or significantly more intense due to climate change, but they seem to be getting wetter. Inland flooding has caused more deaths in the United States in the past 30 years than any other hurricane-related threat.

Early in the 2020 season, Tropical Storm Cristobal made landfall along southeastern Louisiana and triggered flash flooding as far inland as northwest Wisconsin.  

“As the atmosphere continues to warm, storms can hold more moisture and bring more rainfall,” said Triple-I non-resident scholar and Colorado State University atmospheric scientist Dr. Philip Klotzbach. This trend could be exacerbated if, as some experts expect, storms begin traveling more slowly, adding to the moisture they would pick up from the ocean and drop over land.

This is why experts we talk with say, “Get flood insurance.”

We’ve come a long way – and have further to go

Our paper also looks at the evolution of hurricane modeling and forecasting, as well as developments in preparation and mitigation.

Better data and improved modeling have made private insurers comfortable writing coverage, like flood insurance, that was previously considered “untouchable” and enabled the creation of entirely new types of insurance products.

But challenges remain. Experts disagree as to which models are best, and the proprietary nature of these models can make it hard for regulators to determine whether filed rates based on them are unfairly discriminatory.

Hurricane preparation and damage mitigation have benefited from improved communication and public planning.

“Many people still don’t evacuate the way they should,” says Todd Blachier of Church Mutual Insurance, “but states like Louisiana, Florida, Alabama and Mississippi have gotten much better in terms of shutting down inbound roads and creating one-way egress to facilitate evacuation.”

He says officials are acting much more quickly and communicating more effectively, thanks in large part to improved information from the National Oceanic and Atmospheric Administration (NOAA) and other resources.

One area in which improvements could boost resilience is building codes and standards. A recent Federal Emergency Management Agency (FEMA) study quantified the losses avoided due to buildings being constructed according to modern, hazard-resistant codes and standards. In California and Florida — two of the most catastrophe-prone states — FEMA found adopting and enforcing modern codes over the past 20 years led to a long-term average future savings of $1 billion per year for those two states combined.

Disaster Preparedness, Disaster Resilience

Hurricane Laura Update: 8/27/2020

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Damage reports from Hurricane Laura are coming in. Lake Charles, La., was especially hard hit, and there are reports of a chemical leak nearby.

Laura made landfall near Cameron, La., as an “extremely dangerous” Category 4 hurricane. The National Hurricane Center (NHC) said in an early-morning bulletin that Laura had weakened to a Category 3 hurricane, with rapid weakening forecast, and the storm has since been downgraded to a Category 1 as it heads northward.

“Lake Charles experienced severe wind damage but seems not to have seen the amount of storm surge that was feared,” said Triple-I non-resident scholar and Colorado State University atmospheric scientist Dr. Philip Klotzbach.  

Despite the downgrade, the hurricane still had sustained winds of more than 100 mph. Heavy rain is predicted to be widespread across the west-central Gulf Coast, with five to 10 inches falling over a broad area, and locally up to 18 inches, leading to flash flooding.

The storm is now tracking inland across western Louisiana with damaging winds and is an inland flood risk as far north and east as Arkansas and the Ohio and Tennessee valleys. 

“The threat of tornadoes today and even tomorrow also exists as the storm recurves into the Tennessee Valley,” Klotzbach said. 

Catastrophes, Disaster Preparedness, Disaster Resilience

Atypical Wildfire Activity? Of Course — It’s 2020

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If you need any further evidence of the anomalous nature of the year 2020, you can take a look at California’s wildfires. Two of the three largest fires in California history rage across the state, alongside about 600 others, burning more than 1.3 million acres — an area about the size of Delaware — and forcing more than 100,000 people to evacuate.

Those of us who aren’t directly affected may have become jaded enough to think, “More fires in the West. That’s normal.”

But as Janet Ruiz, Triple-I’s California-based director of strategic communications, explains, “We’ve had a significant number of large wildfires since 2015, but this year is anything but normal.”

Your first clue might be the alphabet soup of names applied to this year’s blazes: LNU, CZU, SCU. You might remember Northern California’s major wildfires in recent years — the Camp Fire, the Carr Fire, Tubbs, Ferguson — and wonder why this year’s don’t have similarly straightforward names.

According to California fire officials, it’s because the number of fires has required them to be grouped together in “complexes”:

  • The LNU Lightning Complex in the northeast Bay Area, including Sonoma, Napa, Solano, and Lake counties.
  • The CZU Lightning Complex in the western and southern Bay Area, including San Mateo and Santa Cruz counties.
  • The SCU Lightning Complex in the eastern and southeastern Bay Area, including Santa Clara, Alameda and Contra Costa counties, and neighboring San Joaquin and Stanislaus counties.

“We only group fires like that when we have a lightning siege as such,” Brice Bennet, a public information officer for the California Department of Forestry and Fire Protection (Cal Fire), told the San Francisco Chronicle.

The last major lightning siege was in 2008.

“Once the fires are grouped into a complex,” the Chronicle explains, “they’re managed so fire managers can assess all the different fires within each one and share resources across the greatest need — life being first, and property second. That’s where the prefixes come in. Those monikers are geographical locators based on Cal Fire administrative unit codes.”

Ruiz explained that many of the fires since 2015 were caused by human activity, rather than nature.

“Authorities have worked hard and invested a lot of money to mitigate those causes,” she said. “Then along comes this unpredictable, unpreventable abundance of lightning strikes.”

Fewer firefighters: Thanks, COVID-19

The daunting number of blazes coincides with a reduced availability of firefighters, courtesy of the coronavirus pandemic.

“In past seasons, a lot of help came from inmates recruited to assist in firefighting,” Ruiz said. “Many of these have been released because of COVID-19 and therefore aren’t available.”

Less warning, preparation paramount

Lightning is a universal metaphor for random ill fortune, and the chaotic causation of California’s 2020 fires has affected how authorities communicate with residents about impending threats.

“Normally you’d get warnings about approaching fires, followed, if necessary, by a mandatory evacuation order,” Ruiz said. But last week, when Ruiz was evacuated, “We didn’t get an advisory – we were just told to go.”

Wisely, she and her husband keep “to go” bags near their front door and were able to leave within 10 minutes of receiving the order.

A year characterized by a global pandemic, historic civil unrest, an “extremely active” hurricane season, a destructive derecho – not to mention the more bizarre entomological offerings of murder hornets, zombie cicadas, and invasive “jumping” earthworms – is no time to forgo caution where wildfire safety is concerned.

Ruiz reminds us that this fire season is still young, and more and worse may be in store.

Further Reading:

Safeguard Your Business From Wildfires: Allianz and Triple-I Team Up on Mitigation

Wildfires and Insurance: Learn How to Prepare Financially

Facts and Stats: Wildfire

Are You Financially Prepared for a Wildfire?

Knowing Insurance Is Part of Wildfire Preparedness

Fighting Wildfires With Innovation

Disaster Preparedness, Disaster Resilience

Laura and Marco Set Sights on Northern Gulf Coast

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Tropical storms Laura and Marco are expected to hit the northern Gulf Coast within a few days of each other. Marco was a hurricane on Sunday but has weakened considerably due to strong southwesterly wind shear. 

While Marco’s wind threat has diminished, heavy rain of three to six inches, with small areas potentially receiving 10 inches of rainfall are possible along the north-central and northeast Gulf Coast, according to the National Hurricane Center.  Storm surge of two to four feet also is possible from Morgan City, LA, to Ocean Springs, MS.  Marco is expected to make landfall later today in southeast Louisiana.

Following close behind is Tropical Storm Laura, which forecasters say may intensify to a Category 2 hurricane by the time it makes landfall along the northwestern Gulf Coast.

Residents along the Louisiana coast were urged to prepare for hurricane conditions, and Gov. John Bel Edwards called on them to begin sheltering Sunday evening.

“If you’re in duress and need help, we’re going to get to you as soon as possible,” Edwards said at the state’s Emergency Operations Center, where officials were tracking and preparing for the storms. “But as soon as possible may be longer than it normally is.”

The National Weather Service warned Sunday that the stronger Laura could bring more significant impacts across southern Louisiana because of its potential for higher winds and storm surge and because preparing for Laura will likely be complicated by lingering impacts from Marco.

Texas Gov. Greg Abbott on Sunday declared a state of disaster for 23 counties and requested assistance from the federal government. If Laura were to make landfall in Texas, it could mark the second significant disaster during the 2020 hurricane season for Texas, following Hurricane Hanna dumping more than 15 inches of rain on South Texas in late July as the region was a deadly coronavirus hotspot. The COVID-19 pandemic remains pervasive in Texas, killing at least 200 people every day for the last three weeks, and Abbott reminded the public on Sunday to adhere to mask wearing, social distancing, and other health guidelines.

South Texas cities were the first to deal with a hurricane during the coronavirus pandemic, tweaking shelter practices to have adequate distancing between evacuees and outfitting first responders with protective equipment in order to follow safe coronavirus health guidelines from the Centers for Disease Control and Prevention.

Residents are strongly encouraged to prepare for these and other storms during this “extremely active” hurricane season – particularly with the additional challenge of COVID-19.

Hurricane preparedness guidance is available from Triple-I here.

Insurance considerations

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. Several 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. Nearly 80 percent of U.S. drivers choose to purchase comprehensive coverage.

Disaster Resilience, Flood Insurance, Insurance Industry

Swiss Re: A Katrina-like hurricane could cause up to $200 billion in damage today

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A memorial cross for the victims of Hurricane Katrina stands in the water near the bank of the Mississippi River Gulf Outlet on August 22, 2019 in Shell Beach, Louisiana. According to researchers at the National Oceanic and Atmospheric Administration (NOAA), Louisiana’s combination of rising waters and sinking land give it one of the highest rates of relative sea level rise on the planet. (Photo by Drew Angerer/Getty Images)

Hurricane Katrina, which struck the United States in August 2005, remains the costliest insured North Atlantic hurricane on record and the most expensive natural catastrophe for the global re/insurance industry.  In 2020 dollars, according to a Swiss Re  report released today, total economic damage from Katrina totaled more than $160 billion.

An identical storm today “could easily reach” $200 billion, Swiss Re says.

To evaluate what Hurricane Katrina might look like in 2020 in terms of insured and economic losses, Swiss Re ran Katrina’s 2005 wind and surge footprint on its U.S. market portfolio using its probabilistic tropical-cyclone loss model.

“If Hurricane Katrina were to hit the U.S. in 2020 with the same wind and storm surge as 2005, but with current exposure information and updated flood protection and vulnerability assumptions, the privately insured losses in the U.S. alone could rise to $60 billion,” the report says. “This is true, despite the city (New Orleans) currently only having 80% of the population it did in 2005.”

Private insurance and the federal flood insurance program covered about $86 billion of the total loss, highlighting a protection gap largely driven by uninsured flood losses. Standard residential insurance policies exclude coverage for flood damage resulting from surface water, including storm surge caused by hurricanes; separate flood insurance policies are available through FEMA’s National Flood Insurance Program and private insurers.

“With Katrina, and even more recently with Harvey and Sandy and Florence, we’ve seen this profound protection gap where on average only one in six residences in the U.S. have a flood coverage policy,” said Marla Schwartz Pourrabbani, a Swiss Re natural catastrophe specialist and lead author of the report.

Today, a storm like Katrina would cause closer to $175 billion in damage because areas outside New Orleans, especially in other coastal states, have seen both increases in population and increased investments along the coast that add to the financial risk. Rising sea levels also contribute to the potential losses.

Swiss Re says the effects of climate change could drive total costs  higher.

“Considering that sea level in the barrier islands near New Orleans is now rising by over one inch every two years, a six-inch increase in sea level — and an event like this could happen in just over a decade,” the report says.

Catastrophes, Coastal Property, Disaster Preparedness, Disaster Resilience

I.I.I. Media Tour: What You Need to Know and Do as Hurricane Season Peaks

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The Insurance Information Institute (Triple-I), along with Colorado State University’s atmospheric research scientist Dr. Phil Klotzbach, will be conducting a satellite media tour on Tuesday, August 11, to talk about what may lie ahead for the remainder of the hurricane season.

Dr. Phil Klotzbach, Colorado State University

We will be talking with news organizations throughout the U.S. about the steps individuals and businesses in hurricane-prone states need to take to protect their property and possessions with the right type—and amount—of insurance.

The following subject-matter experts will be available for interviews:

  • Sean Kevelighan, CEO, Insurance Information Institute (Triple-I)
  • Dr. Phil Klotzbach, Research Scientist, Colorado State University and a Triple-I Non-Resident Scholar
  • Laura L. Favinger, Chief Administrative Officer, Triple-I
  • Mark Friedlander, Director, Corporate Communications, Triple-I

Damage caused by tropical storms and hurricanes can upend lives for months, and sometimes years. Even in the country’s most vulnerable coastal states, individuals and businesses may underestimate their risk or have insufficient insurance coverage, operating without either an evacuation or a business continuity plan.

As the peak of 2020’s already busy Atlantic hurricane season approaches, it’s time to make sure you’re ready.

Nearly 20 media outlets have signed up to participate, and the following stations will be broadcasting live interviews (times are Eastern Standard):

08-11-2020 08:35 am – 08:45 am ET: WRAZ-FOX TV Raleigh-Durham (27) “WRAL’s 8am News on Fox50” Live
08-11-2020 09:20 am – 09:30 am ET: WPBF-ABC TV West Palm Beach-Ft. Pierce (36) “WPBF 9AM NEWS” Live
08-11-2020 09:40 am – 09:50 am ET: WBRC-FOX TV Birmingham (Ann and Tusc) (44) “Good Day Alabama” Live
08-11-2020 10:20 am – 10:30 am ET: WTKR-CBS TV Norfolk-Portsmth-Newpt Nws (42) “Coast Live ” Live

If you’d like to arrange an interview with our experts, please contact MultiVu Media Relations, 800.653.5313 x3