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.
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.
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.
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.
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.
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.
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.
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)
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
Hurricane Isaias is expected to strengthen somewhat, to a strong Category 1 hurricane, as it crosses over the Bahamas Friday and Saturday. The National Hurricane Center (NHC) now forecasts Isaias will come extremely close to the east coast of Florida later this weekend.
According to the National Weather Service (NWS), the strongest winds in Florida will be felt from Pompano Beach to Palm Bay, where there’s potential for winds from 58 mph to 73 mph. Miami-Dade and most of Broward are predicted to see winds from 39 mph to 57 mph.
The NHC recently posted hurricane watches from north of Deerfield Beach to the Volusia-Brevard County line and forecasts two to four inches of rainfall from south-central to southeastern Florida, with potential totals of six inches. There is also the potential for some storm surge, with exact levels dependent on the future track and intensity of Isaias.
Residents are strongly encouraged to prepare for Isaias and other storms during this above-average hurricane season – particularly with the additional challenge of COVID-19.
Broward County Sheriff Gregory Tony said South Floridians should “start to examine what other opportunities or options they may have to be out of South Florida.”
“The more that we can do as individuals and focus on the things we can do to reduce the burden on government will be extremely helpful as the mayor, the county administrator are tackling different new challenges and trying to be innovative to the point where we’re not shutting down government completely, but at the same time, we’re not unnecessarily allowing for hazards and exposures to this virus,” Tony said.
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.
South Floridians should “start to examine what other opportunities or options they may have to be out of South Florida,” Broward County Sheriff Gregory Tony said in a virtual press conference as a broad area of low pressure looked increasingly likely to turn into Tropical Storm Isaias.
Tropical storm-force gusts could arrive in Florida as early as Friday night, but Saturday is much more likely, according to the National Weather Service (NWS) Miami.
Tony said the biggest hurdle officials anticipate during the 2020 hurricane season is the ability to effectively maintain social distance while taking in large numbers of people at county storm shelters. Florida has recently experienced a surge in COVID-19 cases.
“The more that we can do as individuals and focus on the things we can do to reduce the burden on government will be extremely helpful as the mayor, the county administrator are tackling different new challenges and trying to be innovative to the point where we’re not shutting down government completely, but at the same time, we’re not unnecessarily allowing for hazards and exposures to this virus,” Tony said.
In preparation for the storm, the Florida Department of Emergency Management has said it will close all state-run COVID-19 testing sites at the end of business day today.
The storm knocked out power to more than 300,000 clients across Puerto Rico, according to the island’s Electric Power Authority. Minor damage was reported elsewhere in the island, where tens of thousands of people still use tarps as roofs over homes damaged by Hurricane Maria in September 2017.
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
