Category Archives: Catastrophes

Catastrophes, Coastal Property, Disaster Resilience, Flood Insurance, Floods, Homeowners Insurance, Insurers and the Economy, Market Conditions, Risk Management

BRIC Funding Loss Underscores Need
for Collective Action
on Climate Resilience

Leave a comment

The Trump Administration’s unwinding of the Building Resilient Infrastructure and Communities (BRIC) program and cancellation of all BRIC applications from fiscal years 2020-2023 reinforce the need for collaboration among state and local government and private-sector stakeholders in climate resilience investment.

Congress established BRIC through the Disaster Recovery Reform Act of 2018 to ensure a stable funding source to support mitigation projects annually. The program has allocated more than $5 billion for investment in mitigation projects to alleviate human suffering and avoid economic losses from floods, wildfires, and other disasters. FEMA announced on April 4 that it is ending BRIC .

Chad Berginnis, executive director of the Association of State Floodplain Managers (ASFPM), called the decision “beyond reckless.”

 “Although ASFPM has had some qualms about how FEMA’s BRIC program was implemented, it was still a cornerstone of our nation’s hazard mitigation strategy, and the agency has worked to make improvements each year,” Berginnis said. “Eliminating it entirely — mid-award cycle, no less — defies common sense.”

While the FEMA press release called BRIC a “wasteful, politicized grant program,” Berginnis said investments in hazard mitigation programs “are the opposite of ‘wasteful.’ “ He pointed to a study by the National Institute of Building Sciences (NIBS) that showed flood hazard mitigation investments return up to $8 in benefits for every $1 spent. 

“At this very moment, when states like Arkansas, Kentucky, and Tennessee are grappling with major flooding, the Administration’s decision to walk away from BRIC is hard to understand,” Berginnis said.

Heading into hurricane season

Especially hard hit will be catastrophe-prone Florida. Nearly $300 million in federal aid meant to help protect communities from flooding, hurricanes, and other natural disasters has been frozen since President Trump took office in January, according to an article in Government Technology.

The loss of BRIC funding leaves dozens of Florida projects in limbo, from a plan to raise roads in St. Augustine to a $150 million effort to strengthen canals in South Florida. According to Government Technology, the agency most impacted is the South Florida Water Management District, responsible for maintaining water quality, controlling the water supply, ecosystem restoration and flood control in a 16-county area that runs from Orlando south to the Keys.

“The district received only $6 million of its $150 million grant before the program was canceled,” the article said. “The money was intended to help build three structures on canals and basins in North Miami -Dade and Broward counties to improve flood mitigation.”

Florida’s Division of Emergency Management must return $36.9 million in BRIC money that was earmarked for management costs and technical assistance. Jacksonville will lose $24.9 million targeted to raise roads and make improvements to a water reclamation facility.

FEMA announced the decision to end BRIC the day after Colorado State University’s (CSU) Department of Atmospheric Science released a forecast projecting an above-average Atlantic hurricane season for 2025. Led by CSU senior research scientist and Triple-I non-resident scholar Phil Klotzbach CSU research team forecasts 17 named storms, nine hurricanes – four of them “major” (Category 3, 4, or 5).  A typical season has 14 named storms, seven hurricanes – three of them major.

Nationwide impacts

More than $280 million in federal funding for flood protection and climate resilience projects across New York City — “including critical upgrades in Central Harlem, East Elmhurst, and the South Street Seaport” – is now at risk, according to an article in AMNY. The cuts affect over $325 million in pending projects statewide and another $56 million of projects where work has already begun.

Senate Majority Leader Chuck Schumer and Gov. Kathy Hochul warned that the move jeopardizes public safety as climate-driven disasters become more frequent and severe.

“In the last few years, New Yorkers have faced hurricanes, tornadoes, blizzards, wildfires, and even an earthquake – and FEMA assistance has been critical to help us rebuild,” Hochul said. “Cutting funding for communities across New York is short-sighted and a massive risk to public safety.”

According to the National Association of Counties, cancellation of BRIC funding has several implications for counties, including paused or canceled projects, budget and planning adjustments, and reduced capacity for long-term risk reduction.

North Dakota, for example, has 10 projects that were authorized for federal funding. Those dollars will now be rescinded. Impacted projects include $7.1 million for a water intake project in Washburn; $7.8 million for a regional wastewater treatment project in Lincoln; and $1.9 million for a wastewater lagoon project in Fessenden. 

“This is devastating for our community,” said Tammy Roehrich, emergency manager for Wells County. “Two million dollars to a little community of 450 people is huge.”

The cancellation of BRIC roughly coincides with FEMA’s decision to deny North Carolina’s request to continue matching 100 percent of the state’s spending on Hurricane Helene recovery.

“The need in western North Carolina remains immense — people need debris removed, homes rebuilt, and roads restored,” said Gov. Josh Stein. “Six months later, the people of western North Carolina are working hard to get back on their feet; they need FEMA to help them get the job done.”

Resilience key to insurance availability

Average insured catastrophe losses have been on the rise for decades, reflecting a combination of climate-related factors and demographic trends as more people have moved into harm’s way.

“Investing in the resilience of homes, businesses, and communities is the most proactive strategy to reducing the damage caused by climate,” said Triple-I Chief Insurance Officer Dale Porfilio. “Defunding federal resilience grants will slow the essential investments being made by communities across the U.S.”

Flood is a particularly pressing problem, as 90 percent of natural disasters involve flooding, according to the National Flood Insurance Program (NFIP). The devastation wrought by Hurricane Helene in 2024 across a 500-mile swath of the U.S. Southeast – including Florida, Georgia, the Carolinas, Virginia, and Tennessee – highlighted the growing vulnerability of inland areas to flooding from both tropical and severe convective storms, as well as the scale of the flood-protection gap in non-coastal areas.

Coastal flooding in the U.S. now occurs three times more frequently than 30 years ago, and this acceleration shows no signs of slowing, according to recent research. By 2050, flood frequency is projected to increase tenfold compared to current levels, driven by rising sea levels that push tides and storm surges higher and further inland.

In addition to the movement of more people and property into harm’s way, climate-related risks are exacerbated by inflation (which drives up the cost of repairing and replacing damaged property); legal system abuse, (which delays claim settlements and drives up insurance premium rates); and antiquated regulations (like California’s Proposition 103) that discourage insurers from writing business in the states subject to them.  

Thanks to the engagement and collaboration of a range of stakeholders, some of these factors in some states are being addressed. Others – for example, improved building and zoning codes that could help reduce losses and improve insurance affordability – have met persistent local resistance.

As frequently reported on this blog, the property/casualty insurance industry has been working hard with governments, communities, businesses, and others to address the causes of high costs and the insurance affordability and availability challenges that flow from them. Triple-I, its members, and partners are involved in several of these efforts, which we’ll be reporting on here as they progress.

Learn More:

Tariff Uncertainty May Strain Insurance Markets, Challenge Affordability

Claims Volume Up 36% in 2024; Climate, Costs, Litigation Drive Trend

Triple-I Brief Highlights Rising Inland Flood Risk

Tenfold Frequency Rise for Coastal Flooding Projected by 2050

Hurricane Helene Highlights Inland Flood Protection Gap

Removing Incentives for Development From High-Risk Areas Boosts Flood Resilience

Executive Exchange: Using Advanced Tools to Drill Into Flood Risk

Auto Insurance, Business Insurance, Catastrophes, Homeowners Insurance, Insurers and the Economy, Market Conditions, Wildfire

Despite Progress, California Insurance Market Faces Headwinds

Leave a comment

Even as California moves to address regulatory obstacles to fair, actuarially sound insurance underwriting and pricing, the state’s risk profile continues to evolve in ways that impede progress, according to the most recent Triple-I Issues Brief.

Like many states, California has suffered greatly from climate-related natural catastrophe losses. Like some disaster-prone states, it also has experienced a decline in insurers’ appetite for covering its property/casualty risks.

But much of California’s problem is driven by regulators’ application of Proposition 103 – a decades-old measure that constrains insurers’ ability to profitably write business in the state. As applied, Proposition 103 has:

  • Kept insurers from pricing catastrophe risk prospectively using models, requiring them to price based on historical data alone;
  • Barred insurers from incorporating reinsurance costs into pricing; and
  • Allowed consumer advocacy groups to intervene in the rate-approval process, making it hard for insurers to respond quickly to changing market conditions and driving up administration costs.

As insurers have adjusted their risk appetite to reflect these constraints, more property owners have been pushed into the California FAIR plan – the state’s property insurer of last resort.  As of December 2024, the FAIR plan’s exposure was $529 billion – a 15 percent increase since September 2024 (the prior fiscal year end) and a 217 percent increase since fiscal year end 2021. In 2025, that exposure will increase further as FAIR begins offering higher commercial coverage for larger homeowners, condominium associations, homebuilders and other businesses.

Insurance Commissioner Ricardo Lara has implemented a Sustainable Insurance Strategy to alleviate these pressures. The strategy has generated positive impacts, but it continues to meet resistance from legislators and consumer groups. And, regardless of what regulators or legislators do, California homeowners’ insurance premiums will need to rise.

The Triple-I brief points out that – despite the Golden State’s many challenges – its homeowners actually enjoy below-average home and auto insurance rates as a percentage of median income. Insurance availability ultimately depends on insurers being able to charge rates that adequately reflect the full impact of increasing climate risk in the state. In a disaster-prone state like California, these artificially low premium rates are not sustainable.

“Higher rates and reduced regulatory restrictions will allow more carriers to expand their underwriting appetite, relieving the availability crisis and reliance on the FAIR plan,” said Triple-I Chief Insurance Officer Dale Porfilio.

With events like January’s devastating fires, frequent “atmospheric rivers” that bring floods and mudslides, and the ever-present threat of earthquakes – alongside the many more mundane perils California shares with its 49 sister states – premium rates that adequately reflect the full impact of these risks are essential to continued availability of private insurance.

Learn More:

California Insurance Market at a Critical Juncture

California Finalizes Updated Modeling Rules, Clarifies Applicability Beyond Wildfire

How Proposition 103 Worsens Risk Crisis in California

Catastrophes, Insurance News

Severe Convective Storm Risks Reshape U.S. Property Insurance Market

Leave a comment
Downtown Houston buildings with damaged windows from derecho

Severe convective storms (SCS) are emerging as a major driver of U.S. property insurance costs, with large hail events alone damaging nearly 600,000 homes in 2024, according to an analysis by CoreLogic.

SCS weather events, which include damaging hail, tornadoes, straight-line winds and derechos, are becoming a significant driver of insured natural disaster losses across the U.S. While hurricanes and wildfires often receive more attention, these intense storms are causing considerable damage, CoreLogic noted.

Scale of Current Damage

In 2024, damaging hail of two inches or greater affected 567,000 single- and multifamily homes across the contiguous U.S. The combined reconstruction cost value (RCV) of these properties is approximately $160 billion. Texas, Nebraska, Missouri, Oklahoma, and Kansas account for 72% of the homes at risk for damaging hail.

The pattern of these storms is shifting. While 2024 saw 133 days of damaging hail—above the 20-year average of 121 days—storm activity is evolving. Rather than extended periods of severe weather, there’s a trend toward more concentrated events, the report explained.

These localized storms can strain resources and claims processing systems, creating challenges for insurers and claims managers. On Sept. 24, a single event in Oklahoma City damaged 35,000 homes, making it the most impactful single hail event of 2024. A derecho that struck Downtown Houston last May caused more damage to “hurricane-proof” buildings than Hurricane Beryl in July, according to a recent study.

Property at Risk from SCS

Hailstorms pose a threat to 41 million homes at moderate or greater risk, representing a reconstruction cost value (RCV) of $13.4 trillion, according to CoreLogic’s risk score models. For tornadoes, 66 million homes are at risk, valued at $21 trillion RCV. Straight-line winds affect 53 million homes with an RCV of $18.6 trillion.

Texas, with 8.1 million homes at moderate or greater risk, has the highest concentration of risk across all storm categories, due to its size and geographic position, according to CoreLogic. The Central U.S. shows the highest overall concentration of SCS risk.

Chicago is the metropolitan area most at risk in all three SCS risk categories, with approximately 3 million homes at risk for each type of severe weather event, the report found. For tornado risk, Dallas and Miami follow Chicago as the most exposed urban centers.

Changing Environmental Conditions

Warmer sea surface temperatures and increased atmospheric moisture are altering storm patterns, according to CoreLogic. The traditional SCS season is expanding, with storms appearing earlier in spring and continuing later into fallTornado impacts are also shifting much further east than historical norms, impacting Midwest states such as Illinois, Indiana, Michigan and Ohio.

Analysts have examined three greenhouse gas emissions representative concentration pathways (RCPs): RCP 4.5, 7.0, and 8.5, projecting outcomes through 2030 and 2050, the report noted. These scenarios indicate a shifting geography of SCS risk, with the South and Midwest facing projected increases.

By 2050, the South and Midwest are expected to see increased SCS activity, including large hail, strong winds, and tornadoes, the analysis found. This shift correlates with elevated atmospheric instability, particularly in higher emissions scenarios.

For the insurance sector, these projections indicate a need for refined risk models and improved infrastructure in emerging high-risk areas. Geographic risk exposure management will become increasingly important as SCS events evolve, according to CoreLogic.

View the full SCS report here.

Catastrophes, Coastal Property, Disaster Resilience, Floods, Risk Management

Parametric Insurance Gains Traction Across U.S.

Leave a comment

By Lewis Nibbelin, Contributing Writer, Triple-I

Heading into 2025, countless communities are still grappling with the $27 billion natural disasters that impacted the United States last year – a total driven by costly storms and severe inland flooding. Many affected residents lacked flood coverage and will rely almost exclusively on federal relief funding to recover, underscoring a widespread protection gap.

Aiming to expedite disaster recovery for riverine communities in the Mississippi River Basin, the Mississippi River Cities and Towns Initiative (MRCTI) recently announced a flood insurance pilot currently in development with Munich Re that will use parametric insurance.

Unlike traditional indemnity insurance, parametric structures cover risks without sending adjusters to evaluate post-catastrophe damages. Rather than paying for specific damages incurred, parametric policies issue agreed-upon payouts if certain conditions are met – for example, if wind speeds or rainfall measurements meet an established threshold. Speed of payment and reduced administration costs can ease the burden on both insurers and policyholders, especially as weather and climate risks become more severe and unpredictable.

Several insurers demonstrated this efficiency in the wake of last year’s hurricanes – among them climate risk-management firm Arbol, which paid out $20 million in parametric reinsurance claims within 30 days after Milton made landfall.

Coast-to-coast trends

Though the MRCTI pilot presents a novel approach to inland flooding, similar pilots are already underway along the coast. New York City developed its own parametric flood program following Superstorm Sandy to bolster the resilience of low- and moderate-income neighborhoods struggling to recover. The program received enough funding last year not only for renewal but expansion, bringing needed protection to even more vulnerable communities.

For flood-prone Isleton, Calif. – a small Sacramento County town that lacks the resources to support a police department – risk mitigation has long taken a backseat to more immediate concerns. But the city’s location in a floodplain made it the perfect candidate for California’s parametric flood pilot, backed by a two-year, $200,000 grant going into effect this year.

The emergence of these community flood solutions reflects a growing interest in parametric insurance throughout the U.S., which propelled the $18 billion value of the global parametric insurance market in 2023. From Lloyd’s first dedicated parametric syndicate to Amwins’ parametric program for golf courses, more parametric coverage options are available than ever before, particularly after numerous private carriers – emboldened by improved data analytics and modeling – expanded their parametric flood insurance business in the U.S. last year.

Take FloodFlash, a leading parametric flood insurance provider based in London. Initially limited to five states, FloodFlash became known for offering coverage beyond the National Flood Insurance Program’s (NFIP) limits and in areas traditionally unsupported by private markets. Increased broker demand motivated the company, in partnership with Munich Re, to gradually roll out coverage to all mainland states last year, ahead of active hurricane season forecasts.

New insurance startups like Ric are also lowering the cost of entry into innovative parametric-based resilience. A winner of the RISE Flood Insurance of the Future Challenge, Ric will launch later this year on the coasts with micro-policies ranging from $14 to $50 per month. The company plans to collaborate with employers to extend their policies as employee benefits, which could help raise awareness of and reduce coverage gaps.

Regulatory momentum

As parametric risk transfer continues to gain traction, regulatory uncertainty in the absence of corresponding insurance laws persists. Given that many jurisdictions have structured their legal insurance framework around traditional indemnity principles, it’s unclear how restrained insurers in some areas are to issuing payouts only for actual losses.

Determining appropriate thresholds for coverage poses another challenge. For example, following extensive devastation from Hurricane Beryl last year, a $150 million parametric catastrophe bond did not yield a payout because air pressure levels narrowly missed the predefined minimum. The ensuing backlash included an intergovernmental “examination” into insurance-linked securities broadly and sparked industry-wide debate surrounding the equity of parametric structures.

To date, only a handful of states have enacted parametric insurance legislation, though substantial movement last year suggests more regulations are on the horizon. Notably, Vermont updated its previous 2022 law permitting captive insurance companies to enter parametric contracts. Based on evidence of their utility as insurance contracts, parametric contracts are now less restricted.

New York also unanimously passed its first parametric insurance law, recognizing parametric coverage as an authorized form of personal line insurance within the state. The law further stipulates mandatory disclosures on all parametric applications that distinguish parametric insurance as less comprehensive, and therefore not a substitute for, traditional property and flood insurance.

Such regulations are a promising step forward towards refining parametric coverage and facilitating its adoption across the country, but tensions between parametric and indemnity risk structures remain largely unresolved. Navigating how parametric insurance functions alone or as part of a package including indemnity coverage will require more collective input from all industry stakeholders.

One thing is for certain: traditional risk-transfer mechanisms are no longer sufficient to address the risk crisis presented by our evolving climate. Tools like parametric insurance – paired with hazard mitigation and community resilience planning – are guiding the way forward.

Learn More:

Rising Interest Seen in Parametric Insurance

Hurricane Delta Triggered Coral Reef Parametric Insurance

Mangrove Insurance: Parametric + Indemnity May Aid Coastal Resilience

Business Risk, Catastrophes, Cyber Risk, Disaster Resilience, Floods, Life Insurance

Executive Exchange: RiskScan Survey Taps Cross-Market Viewpoints

Leave a comment

For insurers, “customer” is one word that encompasses individual policyholders, business owners, risk managers, agents and brokers, and others, all with different (often divergent) priorities. For reinsurers – whose primary customers are insurers themselves – “understanding the customer” is particularly challenging.

This was part of the motivation behind RiskScan 2024 – a collaborative survey carried out by Munich Re US and Triple-I. The survey provides a cross-market overview of top risk concerns among individuals across five key market segments: P&C insurance carriers, P&C agents and brokers, middle-market business decision makers, small business owners, and consumers. It explores not only P&C risks, but also how economic, political, and legal pressures shape risk perceptions. 

“I get very excited when we have a chance to be in our customers’ shoes,” said Kerri Hamm, EVP and head of cyber underwriting, client solutions, and business development at Munich Re US, in a recent Executive Exhange interview with Triple-I CEO Sean Kevelighan. “To really understand how they feel about a broad range of issues from what are their most important risks to how they feel about the cost of insurance and the economic environment.”

 Hamm discussed how more than one-third of respondents ranked economic inflation, cyber risk, and climate change as top concerns, identifying them as “increasing or resulting in rises of the cost of insurance.”

“When we really understand what our customers want, we can design a better product and think about whether the coverages we’re providing are meaningful to them,” Hamm said. “That can help us match pricing better to their expectations.”

One result that Hamm found “surprising” was that “legal system abuse” didn’t appear to be as widely accepted by respondents – apart from the insurance professionals – as driving up insurance costs. Kevelighan cited other research – including by Triple-I’s sister organization, the Insurance Research Council – that has found consumers to be aware of the growing influence of “billboard attorneys”.

Unfortunately, he said, “They don’t seem to be making the connection with how that’s affecting them. What we’re trying to do at Triple-I is to help them make that connection.”

Kevelighan talked about Triple-I’s education campaign around “the billboard effect” in Georgia. That campaign includes an actual billboard (“Trying to fight fire with fire,” he said), as well as a microsite called Stop Legal System Abuse. The campaign focuses on Georgia because the state tops the most recent list of places that the American Tort Reform Foundation calls “judicial hellholes”. 

“We’re trying to help citizens in Georgia see that this is costing you,” Kevelighan said, adding that Triple-I has seen high engagement through the program with people in the state.

Learn More:

Triple-I “State of the Risk” Issues Brief: Legal System Abuse (Members only)

Triple-I Launches Campaign to Highlight Challenges to Insurance Affordability in Georgia

Louisiana Reforms: Progress, But More Is Needed to Stem Legal System Abuse

JIF 2024: What’s In a Name? When It Comes to Legal System Abuse, A Lot

Climate Resilience and Legal System Abuse Take Center Stage in Miami

Agents Play Critical Role in Navigating Impacts of Legal System Abuse on Customers

Legal System Abuse/Social Inflation Adds Costs and Challenges for US Casualty Insurance: AM Best

Who’s Financing Legal System Abuse? Louisianans Need to Know

Catastrophes, Disaster Resilience, Floods, Risk Management, Technology, Wildfire

Data Fuels the Assault
on Climate-Related Risk

Leave a comment

By Lewis Nibbelin, Contributing Writer, Triple-I

Identifying opportunities to mitigate climate risk was on the minds of “Risk Take” presenters at Triple-I’s 2024 Joint Industry Forum (JIF). Risk Takes – a new addition at JIF – are 10-minute problem/solution-oriented presentations by high-impact experts who are deeply engaged in addressing specific perils. 

Inserted between panel discussions of broader issues and trends, these compact talks were tightly focused on how current challenges are being met.

Munich Re US, for example, is diving deep into understanding how consumers and insurers perceive climate-related risks. According to RiskScan 2024, a recently published survey by Munich Re US and Triple-I, more than one-third of respondents ranked climate change as a top concern, identifying it as “a key driver of insurance costs,” said Kerri Hamm, EVP and head of cyber underwriting, client solutions, and business development at Munich Re US.

However, when it comes to flood risk, the survey highlighted a substantial disconnect between concern about the peril and understanding of related insurance coverage. Despite understanding the rising severity of climate risks and their direct influence on insurance costs, many consumers erroneously believe their homeowners policy includes flood coverage or that they do not reside in an area at risk of flooding, contributing to a significant flood protection gap.

High-risk areas are only expanding, Hamm pointed out, as upsurges in flash flooding implicate more and more noncoastal properties. Increased private-sector interest in flood risk has led to new forms of flood coverage, such as a private Inland Flood Endorsement offered at Munich Re, to support these properties. Take-up rates for these insurance products remain low – underscoring the importance of consumer education and improved training for agents and brokers to encourage flood insurance sales.

“We can do better as an industry to make options available, attractive, and better known to vulnerable homeowners,” Hamm said. Education is vital, as is “developing innovative solutions that benefit our society by closing the insurance gap.”

Combining geoscience with data science is one solution, said Helge Jørgensen, CEO and co-founder of the Norway-based 7Analytics. Jørgensen discussed how, by leveraging geological and hydrological information with machine learning technology, his company develops granular data that can map out property flood risk “neighbor by neighbor,” enabling highly representative flood policies.

Beyond incentivizing private insurers to write flood coverage, this data is further “crucial for communities,” Jørgensen stressed, “because, if you have a lot of information on which areas and buildings are more exposed to flooding, then you can build resilience.”

Urban growth, particularly rising populations in higher-risk areas, render community-level resilience initiatives even more important, he noted.

Guidewire’s Christina Hupy reinforced Jørgensen’s emphasis on utilizing granular data while discussing HazardHub, a property risk data platform owned by Guidewire.

“Historically, risk data was provided only at the Census block or even ZIP code level,” Hupy said, whereas HazardHub provides comprehensive and updated geospatial data across various perils to pinpoint individual property risk levels.

In collaboration with Triple-I, HazardHub will release a report in early 2025 focusing on wildfire risk within three high-risk California counties, aiming to demonstrate how using detailed geographic data can help sustain or improve underwriting profitability within such areas.

“We’re going to need to look at mitigation in these high-risk areas as the next frontier,” Hupy said, “to spark that interest from California government and carriers” and enhance resilience “both from a customer and a business perspective” in the state.

California’s Department of Insurance helped launch this frontier last month by announcing new regulations allowing insurers to use catastrophe risk modeling to set rates, rather than limiting insurers to only historic risk data, as was the rule for decades. Insurers must also expand their coverage in riskier areas and account for resilience efforts when setting rates, which was also not previously possible.

Alongside emerging forms of insurance coverage and innovative granular data tools, such regulations empower the insurance industry to incentivize climate risk mitigation and achieve considerable progress towards eliminating the protection gap.

Learn More:

RiskScan 2024 Reveals Risk Priorities Across the Insurance Marketplace

JIF 2024: What’s In a Name? When It Comes to Legal System Abuse, A Lot

JIF 2024: Collective, Data-Driven Approaches Needed to Address Climate-Related Perils

JIF 2024: What Resilience Success Looks Like

JIF 2024: Panel Highlights Human-Centered Use of Advanced Technology

Climate Resilience and Legal System Abuse Take Center Stage in Miami

Catastrophes, Disaster Preparedness, Disaster Resilience, Insurers and the Economy, Regulation, Technology, Wildfire

California Finalizes Updated Modeling Rules, Clarifies Applicability Beyond Wildfire

Leave a comment

California’s Department of Insurance last week posted long-awaited rules that remove obstacles to profitably underwriting coverage in the wildfire-prone state. Among other things, the new rules eliminate outdated restrictions on use of catastrophe models in setting premium rates.

The measure also extends language related to catastrophe modeling to “nature-based flood risk reduction.” In the original text, “the only examples provided of the kinds of risk mitigation measures that would have to be considered in this context involved wildfire. However, because the proposed regulations also permit catastrophe modeling with respect to flood lines, it was appropriate to add language to this subdivision relating to flood mitigation.”

The relevant language applies “generally to catastrophe modeling used for purposes of projecting annual loss,” according to documents provided by the state Department of Insurance.

Benefits for policyholders

As a result, the department said in a press release, “Homeowners and businesses will see greater availability, market stability, and recognition for wildfire safety through use of catastrophe modeling.”

For the past 30 years, California regulations – specifically, Proposition 103 – have required insurance companies to apply a catastrophe factor to insurance rates based on historical wildfire losses. In a dynamically changing risk environment, historical data alone is not sufficient for determining fair, accurate insurance premiums. According to Cal Fire, five of the largest wildfires in the state’s history have occurred since 2017. 

The state’s evolving risk profile, combined with the underwriting and pricing constraints imposed by Proposition 103, has led to rising premium rates and, in some cases, insurers deciding to limit or reduce their business in the state.

With fewer private insurance options available, more Californians have been resorting to the state’s FAIR Plan, which offers less coverage for a higher premium. This isn’t a tenable situation.

“Put simply, increasing the number of policyholders in the FAIR Plan threatens the solvency of insurance companies in the voluntary market,”  California Insurance Commissioner Ricardo Lara explained to the State Assembly Committee on Insurance. “If the FAIR Plan experiences a massive loss and cannot pay its claims, by law, insurance companies are on the hook for the unpaid FAIR Plan losses…. This uncertainty is driving insurance companies to further limit coverage to at-risk Californians.”

“Including the use of catastrophe modeling in the rate making process will help stabilize the California insurance market,” said Janet Ruiz, Triple-I’s California-based director of strategic communication. “Homeowners in California will be able to better understand their individual risk and take steps to strengthen their homes.”

The new measure also requires major insurers to increase the writing of comprehensive policies in wildfire-distressed areas equivalent to no less than 85 percent of their statewide market share. Smaller and regional insurance companies must also increase their writing.

Requirements for insurers

It also requires catastrophe models used by insurers to account for mitigation efforts by homeowners, businesses, and communities – something not currently possible under existing outdated regulations today.

Moves like this by state governments – combined with increased availability of more comprehensive and granular data tools to inform underwriting and mitigation investment – will go a long way toward improving resilience and reducing losses.

Learn More:

Triple-I “Trends and Insights” Issues Brief: California’s Risk Crisis

Triple-I “Trends and Insights” Issues Brief: Proposition 103 and California’s Risk Crisis

Triple-I “State of the Risk” Issues Brief: Wildfire

Triple-I “State of the Risk” Issues Brief: Flood

Catastrophes, Disaster Resilience, Floods, Risk Management, Technology, Webinars

2024’s Nat Cats:
A Scholarly View

Leave a comment

By Lewis Nibbelin, Contributing Writer, Triple-I

Triple-I recently kicked off a new webinar series featuring its Non-Resident Scholars. The first episode focused on the rising severity of natural catastrophes and innovative data initiatives these scholars are engaged in to help mitigate the impact of these perils. 

Moderated by Triple-I’s Chief Economist and Data Scientist Michel Léonard, the panel included:

  • Phil Klotzbach, Senior Research Scientist in the Department of Atmospheric Science at Colorado State University;
  • Victor Gensini, meteorology professor at Northern Illinois University and leading expert in convective storm research;
  • Seth Rachlin, social scientist, business leader, and entrepreneur currently active as a researcher and teaching professor; and
  • Colby Fisher, Managing Partner and Director of Research and Development at Hydronos Labs.

“Wild and crazy”

Klotzbach discussed “the wild and crazy 2024 Atlantic hurricane season,” which he called “the strangest above-normal season on record.”

Abnormally fluctuating periods of activity this year created “a story of three hurricane seasons,” reflecting a broader trend of decreasing storm frequency and increasing storm severity, Klotzbach said.

While Klotzbach and his forecasting team’s “very aggressive prediction for a very busy season” was validated by Hurricane Beryl’s landfall as the earliest Category-5 hurricane on record — followed by Debbie and Ernesto — “we went through this period from August 20 to September 23 where we had almost nothing. It was extremely quiet.”

After extensive media coverage claiming the forecasts were a “massive bust,” along came Hurricane Helene, which developed into the “strongest hurricane to make landfall in the Big Bend of Florida since 1851.” Helene drove powerful, destructive flooding inland – most notably in Asheville, NC, and surrounding communities. Then came Hurricane Milton which was noteworthy for spawning numerous fatal tornadoes.

“Most tornadoes that happen with hurricanes are relatively weak – EF0, EF1, perhaps EF2,” Gensini – the panel’s expert on severe convective storms (SCS) – added. “Milton had perhaps a dozen EF3 tornadoes.”

Costly and underpublicized

Severe convective storms – which include tornadoes, hail, thunderstorms with lightning, and straight-line winds – accounted for 70 percent of insured losses globally the first half of 2024. And in 2023, U.S. insured SCS-caused losses exceeded $50 billion for the first time on record for a single year.

Hailstorms are especially destructive, behind as much as 80 percent of SCS claims in any one year. Yet their relative brevity and limited scope compared to large-scale disasters earns them far less public and industry attention.

“We haven’t had a field campaign dedicated to studying hail in the United States since the 1970s,” Gensini explained, “so it’s been a long time since we’ve had our models updated and validated.”

Data-driven solutions

To rectify this knowledge gap, the In-situ Collaborative Experiment for the Collection of Hail in the Plains (or ICECHIP) will send Gensini and some 100 other scientists into the Great Plains to chase and collect granular data from hailstorms next year. Beyond developing hail science, their goal is to improve hail forecasting, thereby reducing hail damage.

Gensini pointed to another project, the Center for Interdisciplinary Research on Convective Storms (or CIRCS), which is a prospective academic industry consortium to develop multidisciplinary research on SCS. Informed by diverse partnerships, such research could foster resilience and recovery strategies that “move forward the entire insurance and reinsurance industry,” he said.

Rachlin and Fisher echoed this emphasis on enhancing the insurance industry’s facilitation of risk mitigation in their presentation on Hydronos Labs, an environmental software development and consulting firm that utilizes open-source intelligence (OSINT).

The costs and variability of climate and weather information have created “a data arms race” among insurance carriers, and aggregating and analyzing publicly available information is an untapped solution to that imbalance, they explained.

The company’s end goal, Rachlin added, is to promote an insurance landscape centered around “spending less money on [collecting] data and more money using data.”

All panelists stressed the ongoing need for more reliable, comprehensive data to steer industry strategies for effective mitigation. Investments in this data now are less than the costs of post-disaster recovery that will continue to plague more and more communities in our rapidly evolving climate.

Register here to listen to the entire webinar on demand.

Learn More:

Triple-I “State of the Risk” Issues Brief: Hurricanes

Triple-I “State of the Risk” Issues Brief: Flood

Triple-I “State of the Risk” Issues Brief: Severe Convective Storms

Outdated Building Codes Exacerbate Climate Risk

JIF 2024: Collective, Data-Driven Approaches Needed to Address Climate-Related Perils

Climate Resilience and Legal System Abuse Take Center Stage in Miami

Triple-I Experts Speak on Climate Risk, Resilience

NAIC, FIO to Collaborate on Data Collection Around Climate Risk

Catastrophes, Disaster Preparedness, Disaster Resilience, Floods, Homeowners Insurance, Market Conditions, Risk Management, Wildfire

JIF 2024: Collective,
Data-Driven Approaches Needed to Address Climate-Related Perils

Leave a comment

The need for collective action to address the property/casualty risk crisis was a recurring theme throughout Triple-I’s Joint Industry Forum in Miami – particularly during the panel on climate risk and  resilience. The discussion focused heavily on what’s currently being done to address this evolving area of peril.

The panel, moderated by Veronika Torarp – a partner in PwC Strategy’s insurance practice – consisted of subject-matter experts representing a cross section of natural perils, from hurricanes and floods to wildfires and severe convective storms. They were:

  • Dr. Philip Klotzbach, research scientist in the Department of Atmospheric Science at Colorado State University;
  • Matthew McHatten, president and CEO at MMG Insurance and chairman of Triple-I’s Executive Leadership Committee;
  • Emily Swift, sustainable business framework senior manager at American Family Insurance; and
  • Heather Kanzlemar, consulting actuary at Milliman.

Part of the reason for this need to build coalitions is the diverse and overlapping causes of climate-related events and the related losses. Torarp cited a PwC study that projects the global protection gap in 2025 at $1.9 trillion, though she acknowledged that number may turn out to be “an understatement”.

Warmer, wetter, riskier

Running through the discussions of the various perils was the dynamic nature of evolving threats and the protection gap. Examples included increased inland flooding, such as the devastation caused in the rural southeast by Hurricane Helene, and damage inflicted by surprisingly intense tornadoes spun off by Hurricane Milton.

Dr. Klotzbach discussed the “very busy” 2024 Atlantic Hurricane season with its surprising impact on Asheville, N.C., and surrounding communities from Helene.

“It’s important to understand that the inland flooding threat is extremely problematic,” he said.

MMG’s McHatten emphasized the complexity of addressing flood risk, given the environmental forces driving it.

“Warmer planet, warmer ocean, more precipitation, more wind,” he said, “as well as this dynamic of atmospheric rivers and what happens to them as they start to hit higher elevations.” He pointed out how such conditions – which led to cataclysmic rains in Ashville as well as in MMG’s home state of Maine and the mountains of Vermont – are exacerbated by population trends.

“People live near water because that’s where economy and commerce was,” he said. “The ability to adapt to dynamic conditions that are changing rapidly is super-difficult. We can’t just say, ‘Raise every house six feet’ that’s near a body of water.”

Hope amid the perils

American Family’s Emily Swift discussed the state of severe convective storm risk, which she said is tending to migrate from its historic domain of the U.S. Midwest toward the Southeast.

“As we’re seeing the impact of hurricanes move further west and severe convective storms move further east, that means a lot more risk exposure to our customers who are living in those regions,” she said. “However, I think there’s a lot of hope.”

Swift talked about emerging partnerships between the insurance industry and academia — particularly work being done through Industry-University Cooperative Research Centers (IUCRC) funded by the National Science Foundation (NSF) to better understand severe convective storms and develop innovative ways of addressing the risks they pose.

“I’m optimistic that, although we don’t know quite the direction where severe convective storms are heading, we at least have diversified our risks to better manage them” – thanks, in part, to the learnings derived from these partnerships, Swift said.

Kanzlemar reinforced Swift’s optimistic tone in discussing Milliman’s work around wildfire risk. In the midst of a growing insurance availability and affordability crisis in fire-prone states – particularly California – Milliman is partnering with the Insurance Institute for Building and Home Safety (IBHS) and and stakeholders in its Wildfire Prepared Home program to gather data to help inform insurance underwriting, as well as mitigation and prevention at the community level.

“Most insurers have data on type of structure, what the roof material is, the number of stories,” Kanzlemar said, “but a lot of the granular data around eave enclosures, ember-resistant vents, that data is typically not available, and almost no insurers had that data at a community level to account for adjacent risk.”

That’s the bad news, she said, but “the good news is in the kinds of solutions we’re working toward. Most insurers were willing to consider a contributory data model like a comprehensive loss-underwriting exchange for [wildland-urban interface (WUI)] data as long as there’s sufficient participation and reciprocity. That’s an effort that we’re calling the ‘WUI Data Commons’. ”

All the panelists agreed that such collaborative, data-driven approaches that respect consumer needs and interests at the community level were going to be key to solving natural catastrophe risk in our rapidly changing future.

Learn More:

Triple-I “State of the Risk” Issues Brief: Flood

Triple-I “State of the Risk” Issues Brief: Wildfire

Triple-I “State of the Risk” Issues Brief: Hurricane

Triple-I “State of the Risk” Issues Brief: Convective Storms

Resilience Investments Paid Off in Florida During Hurricane Milton

Hail: The “Death by 1,000 Paper Cuts” Peril

Accurately Writing Flood Coverage Hinges on Diverse Data Sources

Catastrophes, Coastal Property, Disaster Resilience, Floods, Homeowners Insurance

Resilience Investments Paid Off in Florida
During Hurricane Milton

Leave a comment

By Lewis Nibbelin, Contributing Writer, Triple-I

Babcock Ranch – a small community in southwestern Florida dubbed “The Hometown of Tomorrow” – made headlines for sheltering thousands of evacuees and never losing power during Hurricane Milton, which devastated numerous neighboring cities and left more than three million people without power.

Hunters Point, a subdivision on Florida’s Gulf Coast, remained similarly unscathed during both Hurricanes Helene and Milton. Though the development is only two years old, it’s already been through four major hurricanes. Its homes were designed with an elevation high enough to avoid severe flooding and materials that make them as sturdy as possible in high winds. When the power goes out, each home turns to its own solar panels and battery system.

For residents of both communities, this news comes as no surprise; their flood-resistant infrastructure and solar panel power systems have helped them survive several storms and hurricanes with only minor damages, demonstrating the utility of disaster resilience planning.

Such planning is expensive to implement. Homes in either community can run for over a million dollars. But, as the combined costs of Hurricanes Helene and Milton rise to the tens of billions, it’s hard to overstate the long-term benefits. Every dollar invested in disaster resilience could save 13 in property damage, remediation, and economic impact costs, suggesting risk mitigation and recovery strategies will become even more essential as natural catastrophe severity increases.

Incentivizing investment

The National Flood Insurance Program (NFIP) Community Rating System (CRS) – a voluntary program that rewards homeowners with reduced premiums when their communities invest in floodplain management practices that exceed NFIP minimum standards – aims to encourage resilience. Class 1 is the program’s highest rating, qualifying residents for a 45 percent reduction in their premiums. Of the nearly 23,000 participating NFIP communities, only 1,500 participate in the CRS. Of those 1,500, only two – Tulsa, Okla., and Roseville, Calif. – have achieved the highest rating.

High ratings are difficult to secure and maintain. Homeowners in Lee County, which borders Babcock Ranch, nearly lost their discounts earlier this year due to improper post-Hurricane Ian monitoring and documentation within flood hazard areas.

Discounts in lower-rated jurisdictions, however, still equate to large premium reductions. Miami-Dade County, Fla., for instance, earned a Class 3 rating after extensive stormwater infrastructure upgrades, saving the community an estimated $12 million annually. Residents sustained minimized flooding from Hurricane Milton under these improvements, further justifying their cost.

Local mitigation efforts offer targeted resilience solutions and resources to alleviate community risks. The insurance industry-funded Strengthen Alabama Homes provides homeowners grants to retrofit their houses along voluntary standards for constructing buildings resistant to severe weather. Completed retrofits reduce post-disaster claims and qualify grantees for substantial insurance premium discounts, prompting flood-prone Louisiana to replicate the program.

Other nature-based planning exploits local flora as a source of natural hazard protection. Previous studies support conserving natural wetlands and mangroves to impede the rate and flow of flooding, leading many communities – including Babcock Ranch, which is 90 percent wetlands – to invest in green infrastructure. Reforestation and wetland restoration projects undertaken by the Milwaukee Metropolitan Sewerage District (MMSD) also promise to store or capture millions of gallons of storm and flood water, enabling risk management alongside improved quality of life for citizens.

Most resilience projects are impossible to fund or operate without stakeholder partnerships and advanced data and analytics. Insurers, who have long assessed and measured catastrophe risk utilizing cutting-edge data tools, are uniquely positioned to confront these evolving risks and present a framework for successful preemptive mitigation.

Learn More:

Hurricane Helene Highlights Inland Flood Protection Gap

Removing Incentives for Development From High-Risk Areas Boosts Flood Resilience

Executive Exchange: Using Advanced Tools to Drill Into Flood Risk

Accurately Writing Flood Coverage Hinges on Diverse Data Sources

Legal Reforms Boost Florida Insurance Market; Premium Relief Will Require More Time

Lee County, Fla., Towns Could Lose NFIP Flood Insurance Discounts

Coastal New Jersey Town Regains Class 3 NFIP Rating