Category Archives: Catastrophes

Catastrophes, Disaster Preparedness, Disaster Resilience, Earthquakes, ESG, Insurers and the Economy, Regulation, Risk Management

As Nat Cat Losses Mount, A Resilience Mindset Matters More Than Ever

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Insurance is essential for individuals, businesses, and communities to recover quickly from natural  catastrophes – but perils have evolved to a point at which risk transfer, though necessary, isn’t enough to ensure resilience.

Triple-I CEO Sean Kevelighan said during a that better insured communities recover more quickly but “the long-term resilience of both the communities impacted by natural catastrophes and of the industry itself depend on preparedness and improved risk mitigation.”  He was one of three panelists participating in the webinar.

“Something’s Got to Give”

Insured U.S. natural catastrophe losses totaled $67 billion in 2020 after an Atlantic hurricane season which included 30 named storms, record-setting wildfires in California, Colorado, and the Pacific Northwest, and a severe derecho in Iowa. This year’s hurricane season looks to be more severe; the Bootleg wildfire in Oregon – so large and intense it has begun to create its own weather and is affecting air quality as far east as New York City – isn’t  expected to be fully contained until late November; and these disasters are taking place on the heels of devastating winter storms in the first quarter.

As Kevelighan put it in his panel remarks, pointing to a 700 percent increase in insurer loss costs since the 1980s, “Something’s got to give.”

“As the country’s financial first responders,” he said, “insurers are not just responsible for providing relief to the communities affected by natural disasters, but also planning for potential catastrophes to come.”  

One of the ways insurers do this, he said, is by building the industry’s cumulative policyholders’ surplus—the amount of money remaining after insurers’ collective liabilities are subtracted from their assets. At year-end 2020, the U.S. policyholders’ surplus stood at a record-high $914.3 billion.

Mitigate and educate

The role of the insurance industry has grown beyond merely taking on risks to educating the public, regulators, and corporate decision makers on the changing nature of risk and driving a resilience mindset characterized by a focus on pre-emptive mitigation and rapid recovery. Triple-I and a host of other insurance industry organizations have played a key role in promoting public-private partnerships and using advanced data and analytics to understand and address hazards in advance.

For example, Triple-I’s online Resilience Accelerator provides access to data and risk maps that empowers the public to assess and prepare for risks specific to their own communities.

This webinar, co-presented by The Institutes’ Griffith Foundation and the Insurance Regulator Education Foundation, included panelists Hanna Grant, Head of the Secretariat, Access to Insurance Initiative; and Dr. Abhishek Varma, Associate Professor, Finance, Insurance and Law, Illinois State University. It was moderated by James Jones, Executive Director, Katie School of Insurance and Financial Services, Illinois State University.

Webinar highlights:

Catastrophes, Disaster Preparedness, Disaster Resilience, Earthquakes

Unethical Contractors Emerge After Disasters; Know How to Avoid Them

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Natural disasters create opportunities for unethical contractors, and consumers need to be on the alert.

Post-disaster repair scams typically start when a contractor makes an unsolicited visit to a homeowner and pressures the homeowner to pay the contractor their insurance claim money – then disappear without doing the work.

Triple-I is teaming up with the National Insurance Crime Bureau (NICB) during the NICB’s Contractor Fraud Awareness Week (July 12-16) to educate the public about such frauds and how to avoid them.

Before hiring any contractor, consumers affected by a natural disaster should call their insurer. There’s no need to rush into an agreement. Homeowners should inspect all work and make sure they are satisfied before paying. Most contractors will require a reasonable down payment, but no payments should be made until a written contract is in place.

The NICB offers these tips to homeowners before hiring a contractor:

  • Be wary of anyone knocking on your door offering unsolicited repairs to your home. 
  • Be suspicious of any contractor who rushes you or says the government endorses them.
  • Shop around for a contractor by getting recommendations from people you trust.
  • Get three written estimates for the work and compare bids.
  • Check a contractor’s credentials with the Better Business Bureau.
  • Always ask for a written contract that clearly states everything the contractor will do.
  • Never sign a contract with blank spaces because it could be altered afterward.
  • Never pay for work up front and avoid paying with cash; use either a check or credit card.

The NICB Post-Disaster Contractor Search Checklist explains the contractor hiring process step by step.  Anyone with information concerning insurance fraud or vehicle theft can report it anonymously by calling toll-free 800-TEL-NICB (800-835-6422) or submitting a form to the NICB.

“Acting as communities’ financial first responders, insurers rebuild damaged homes, cars, and lives after a natural disaster,” said Triple-I CEO Sean Kevelighan.  “The Insurance Information Institute is proud to join forces with the NICB to educate consumers and communities about how to best prepare and recover economically.”

“Victims of disasters are under tremendous stress as they are often pulled from their homes, fight heavy traffic attempting to get to safety, all while leaving their home and belongings behind,” said NICB President and CEO David Glawe. “When they go home, they are exhausted and strained, a time when they are most susceptible to these fraudulent schemes.”

RELATED LINKS:

Article: Insurance Fraud

Facts & Statistics: Insurance Fraud

Catastrophes, Coastal Property, Disaster Resilience, Health & Safety, Risk Management

Long-Term ConsiderationsFrom Condo Collapse

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  • (Photo by Joe Raedle/Getty Images)

The insurer for the Champlain Towers South condo association has said it will make an up-front payment to resolve damage claims related to the 12-story beachfront property in the Miami  suburb of  Surfside, Fla., that collapsed on June 24, 2021.

“We want to make it known that James River Insurance Company has made the decision to voluntarily tender its entire limit from the enclosed policy towards attempting to resolve all the claims in this matter,” the insurer’s attorney wrote to the judge handling a class-action lawsuit seeking millions of dollars in damages from the association.

Since the collapse last week, four residents or their families have filed lawsuits against the association. Many more suits are expected in the coming months, and litigation could take years as investigators work to determine what caused the collapse. The first court hearing was held yesterday, and a Miami-Dade Circuit judge acknowledged that the building’s $48 million in total insurance coverage likely won’t be enough.

In all, the court heard, the condo association’s master policy has $30 million in property coverage and $18 million in liability coverage. The condo association has agreed to hand over financial decision making to a court-appointed “receiver.”

Seeking survivors as storm nears

With investigators still working to find and rescue survivors and Hurricane Elsa – the first of the 2021 Atlantic hurricane season and earliest “E-named” storm on record – heading toward Florida, the situation remains fluid. This week, dozens of units at a Central Florida condominium complex near Disney World were deemed unsafe after an inspection found the walkways leading to the units were at risk of collapsing, according to an Osceola County spokesperson.  Residents were advised to enter the buildings containing the units at their own risk, the spokesperson said, adding that county staff were offering residents assistance with temporary housing.

Increased attention to the condition of older high-rise buildings in South Florida and across the U.S. in the wake of the Champlain Towers collapse could lead to a rise in claims for loss-of-use coverage. In addition, many businesses in the vicinity of the collapse have been made inaccessible during the rescue operation, which could lead to business interruption claims.

Spotlight on building codes

Furthermore, this event could lead to a review of building codes and inspection practices nationwide. South Florida’s building codes are among the nation’s strongest – designed to keep residents safe from hurricanes. The state implemented mandatory codes after Category 5 Hurricane Andrew ripped homes from their foundations and left 65 dead in Homestead in 1992, and some counties – particularly in South Florida – have added more stringent requirements.

But after last week’s collapse, IBHS chief engineer Anne Cope said, “This is a moment like Katrina and Andrew, where we are going to learn something and make changes.”

Many of the region’s buildings – including  Champlain Towers South – were built before 1992 as part of a South Florida condo boom. Those buildings are subject to codes that were in place at the time of their construction, and are only required to undergo local county inspections every 40 years – such as the 2018 review of the Surfside condo in which an engineer raised red flags that the building was beginning to address but didn’t warn of imminent disaster.

A FEMA study last year said implementation of modern building codes could save states and localities billions of dollars.

Catastrophes, Disaster Resilience, Flood Insurance, Floods

Extreme Weather’s Seasonal Severity Impacts Rates, Regardless of Inflation, Price Gouging

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Losses from the winter storm that swept through the southern United States earlier this year continue to loom large among the concerns of property and casualty insurers, even as the nation contends with wildfires and anticipates yet another above-average hurricane season.

“On its own, Uri would not necessarily impact premium rates,” says Dr. Michel Léonard, CBE, Triple-I vice president and senior economist. “What matters is the overall severity of extreme weather events during a calendar year or a specific peril season.”

Dr. Léonard reports that current expectations among weather experts of higher-than-average hurricane and wildfire seasons – in addition to Uri – will likely contribute to increases in property insurance rates in 2021, “before and regardless of inflation.”

“Traditionally, actuarial models keep natural catastrophe losses and inflation separate and combine them in the last stage of rate estimates,” Léonard says. 

Three 2021 trends, he says, add up to put upward significant pressure on insurance rates for 2022:

  • Combined 2021 natural catastrophe losses from winter storms, hurricanes, and wildfires expected to be above annual averages;
  • Overall inflation in the U.S. currently forecast to be between 4% and 6% for 2021, the highest in a decade; and
  • Industry-specific inflation above the national average for construction materials and labor due to COVID-19 supply-chain disruptions.

“There are a few situations in which extreme weather events directly contribute to replacement cost increases, which, in turn, impact rates,” Léonard says. “But ‘price gouging’ – such as happened after Uri – shouldn’t be confused with inflation. It’s temporary, while inflation almost always endures.”

Catastrophes, Disaster Preparedness, Disaster Resilience, Earthquakes, Risk Management

Dear California:As You Prep for Wildfire, Don’t Neglect Quake Risk

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It’s important for people living in earthquake-prone areas to remember that standard homeowners and renters insurance don’t cover most earthquake damage.

For this reason, Janet Ruiz, Triple-I’s California-based director of strategic communication, advises people in the state to consider buying a policy that, at a minimum, covers the structure, building code upgrades, and emergency repairs.

“You can also get coverage for additional living expenses and personal property, and some companies even cover damaged swimming pools or masonry veneer,” Ruiz writes in a recent Op-Ed in The San Diego Union-Tribune.

As the South Napa and Ridgecrest earthquakes – in 2014 and 2019, respectively – recede from memory and wildfire readiness and resilience seem the more immediate need, Ruiz reminds Californians that even relatively mild tremors can inflict costly damage. She therefore encourages residents to reduce their risk through education, mitigation, and insurance.

There are a number of earthquake insurance providers in California. Many participate in the California Earthquake Authority (CEA), but some non-CEA insurers also provide options to help protect Californians from financial loss.

“CEA offers premium discounts to policyholders who have retrofitted, or strengthened, their older homes to help them better withstand shaking,” Ruiz writes.

In a separate Op-Ed, CEA CEO Glenn Pomeroy advises on retro-fitting older homes to be more quake resistant and resilient. Older homes – especially those built before 1980 – are more susceptible to earthquake damage because they predate modern seismic building codes. According to U.S. Census data, more than 53 percent of the housing units in San Diego County fall into that category of being built before 1980 and could be in need of retrofitting.

Seismic retrofitting can be straightforward and often not as expensive as homeowners might think. Depending on the type of retrofit needed, the work can usually be done in a couple of days, with costs ranging from $3,000 to $7,000.

“Compared to the potential cost of repairing an earthquake-damaged home,” Pomeroy writes, “spending a smaller amount of money to help prevent damage can help avoid a much bigger repair bill after an earthquake. Whatever the cost, it is a relatively small price to pay to protect the value of your home and, more importantly, make it safer for your family.”

Particularly important as the need for pandemic social distancing continues, Pomeroy points out, “Homeowners can remain inside their dwelling as workers do the job without entering the residence.”

Catastrophes, Coastal Property, Disaster Preparedness, Disaster Resilience

IBHS Ranks Building Codes as Above-Average Hurricane Season Approaches

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Building codes are critical to disaster mitigation, as well as to enabling families, communities, and businesses to bounce back from natural and man-made catastrophes.  The Insurance Institute for Business and Home Safety (IBHS) “Rating the States” report has become an important resource for comparing the quality of these codes and of states’ enforcement of them.

Published every three years, “Rating the States” evaluates the 18 states along the Atlantic and Gulf coasts, all vulnerable to catastrophic hurricanes, based on building code adoption, enforcement, and contractor licensing.

The 2021 Atlantic hurricane season is expected to be another “above-average” one.

“Damage reduction that results from the adoption and enforcement of building codes helps to keep people in their homes and businesses following a natural or manmade disaster, reduces the need for public and private disaster aid, and preserves the built environment,” IBHS writes in the most recent edition of the report. It cites research following Hurricane Charley in 2004 that found code improvements adopted in 1996 in Florida resulted in a 60 percent reduction in residential property damage claims and a 42 percent reduction in cost of claims.

Benefits of strong, uniform, well-enforced statewide codes are diverse and include:

  • Giving residents a sense of security about the safety and soundness of their buildings,
  • Preserving economic resources of a community and reducing post-disaster government spending,
  • Protecting first responders during and after fires and other disaster events,
  • Incorporating new best practices and cost efficiencies, and
  • Reducing solid waste in landfills from homes that are damaged or destroyed during disasters.

In the 2021 report, no state achieved a perfect rating based on the IBHS 100-point scale, though several states received high scores, including:

  • Florida (95 points)
  • Virginia (94 points)
  • South Carolina (92 points) and
  • New Jersey (90 points).

Other states that performed well were Connecticut (89 points), Rhode Island (89 points), North Carolina (88 points), Louisiana (82 points), Massachusetts (78 points), and Maryland (78 points).

The 2021 edition also includes information from the nonprofit Federal Alliance for Safe Homes (FLASH) to support consumer awareness and response to local building codes in their area.  Inspect2Protect.org offers a free building code look-up tool available to all homeowners.

“With more Americans living in harm’s way, it is even more critical for residents and communities to have the information they need to take action,” said Triple-I CEO Sean Kevelighan. “2021’s Rating the States report is essential reading for anyone who resides in a hurricane-prone state and wants a definitive assessment of its building codes.”

More information from Triple-I

Hurricane Season: More Than Just Wind and Water

Flood: Beyond Risk Transfer

Modern Building Codes Would Prevent Billions in Catastrophe Losses

California Earthquakes: How Modern Building Codes Are Making Safer, More Resilient Communities

Millions Saved in Japan by Good Engineering and Government Building Codes

Catastrophes, Disaster Preparedness, Disaster Resilience, ESG, Insurers and the Economy, Regulation, Risk Management

Triple-I CEO: Insurance Leading on Climate Risk

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Triple-I CEO Sean Kevelighan recently briefed regulators on the steps U.S. insurers are taking to reduce climate-related risks as weather-related catastrophes increase in frequency and severity.

Environmental, Social, and Governance (ESG) issues are in the insurance industry’s DNA, Sean said in a panel discussion hosted by the National Association of Insurance Commissioners’ (NAIC) Climate and Resiliency Task Force.  “While ESG priorities may seem new to many industries, insurers have long been involved in understanding and addressing these and other risk factors as a fundamental part of doing business.” 

Speaking on the first day of the 2021 Atlantic hurricane season, Sean pointed out investment decisions made by leading insurers that he said will likely lead to carbon emission reductions.

“Insured losses caused by natural disasters have grown by nearly 700 percent since the 1980s, and four of the five costliest natural disasters in U.S. history have occurred over the past decade,” he said.

To illustrate the point, he showed an inflation-adjusted chart showing an annual averageof$5 billion in natural disaster-caused insured losses incurred in the 1980s. That figure jumped to an annual average of $35 billion in the 2010s, the same Triple-I analysis found. 

U.S. insurers paid out $67 billion in 2020 due to natural disasters. The insured losses emerged in part as the result of 13 hurricanes, five of the six largest wildfires in California’s history, and a derecho that caused significant damage in Iowa. 

Given the millions of Americans who live in harm’s way, the Triple-I launched its Resilience Accelerator initiative to help people and communities better manage risk and become more resilient, Sean said. The goal of the Triple-I’s Resilience Accelerator is to demonstrate the power of insurance as a force for resilience by telling the story of how insurance coverage helps governments, businesses and individuals recover faster and more completely after natural disasters.

“The insurance industry’s focus on resilience is starting to pay dividends as more Americans recognize the very real risks their residences face from floods, hurricanes, and other natural disasters,” Sean continued.

A Triple-I Consumer Poll released in September 2020 found 42 percent of homeowners had made improvements to protect their homes from floods and 39 percent had done the same to protect their homes from hurricanes.

Download Sean’s slides

Catastrophes, Coastal Property, Disaster Preparedness, Disaster Resilience, Flood Insurance, Floods

Flood Pictures Worth More Than 1,000 Words

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One of the benefits of social media is the fact that it reminds you what was on your mind several years earlier. Today I was reminded of the horrific flooding in Ellicott City, Md., that occurred three years ago this week.

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Water rushes through Main Street in Ellicott City, MD, 2018

This event resonated for me because I had friends living there, and I lived in a similarly situated flood-prone town. The images from Ellicott City recalled for me the damage much closer to home, in Bound Brook, NJ, when Tropical Storm Floyd dropped over 13 inches of rain and the Raritan River crested at above 42 feet, inundating the downtown and sparking fires as electrical systems shorted out.  

My little town of Dunellen had dodged a major bullet, I realized as I watched on TV as firefighters in boats responded to the devastation next door.  Our basement, turned temporarily into an indoor swimming pool, seemed a minor inconvenience next to the losses in Bound Brook and elsewhere.

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Firefighters battle a fire in flood-ravaged Bound Brook, NJ, 1999

A few years later, my region would be visited by similarly shocking images in the aftermath of Hurricane Irene and Superstorm Sandy.

Rollercoaster at Seaside, NJ, after Superstorm Sandy, 2012

We’ve written a lot about flood risk, the flood protection gap, and the need for a resilience mindset to prevent damages and loss wherever possible and help families, businesses, and communities bounce back from unavoidable disasters. But sometimes a few images can persuade more eloquently and effectively than all the words in the world.

Learn More From the Triple-I Blog

Flood: Beyond Risk Transfer

Partnering to Improve Flood Resilience

FEMA’s New Approach to Flood Risk Will Make Insurance Program Fairer

Floods, Freezing, Other Extreme Weather Highlight Need for Planning And Insurance

Study Quantifies Future Climate Change Impact on Flood Losses

Study Supports Case for Flood Mitigation as World Warms

Expanded Triple-I Flood Risk Maps Provide Richer Perspective

If It Can Rain, It Can Flood: Buy Flood Insurance

Ahead of Hurricane Sally’s Rains, Many Lack Flood Insurance

Catastrophes, Disaster Resilience

Ten years after deadly tornado, Joplin Missouri is disaster-ready

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May 22 marks the ten-year anniversary of the Joplin, Missouri, tornado – the deadliest single tornado event in U.S. history. In these videos, Triple-I’s Scott Holeman shows how the people of Joplin have recovered and become more resilient.

The EF-5 tornado destroyed thousands of homes and businesses and was the largest insurance event in Missouri history, with insured losses totaling roughly $9 billion (in 2021 dollars).

Survivors of the 2011 tornado say many lessons were learned after the devastating storm. Local insurance experts say the disaster taught the community about the importance of renters insurance and keeping homeowners policies updated. 

Today, many Joplin residents prepare a “go-kit” whenever there’s a storm threat.

Numerous public facilities, businesses and residences have added enhanced safety modifications. The high school and hospital are prominent examples.

Catastrophes, Disaster Preparedness, Disaster Resilience, Homeowners Insurance, Webinars

Bracing for Another Brutal Wildfire Season

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Wildfires in California and across the West are starting earlier and ending later each year.  The ongoing drought worsened last week, with every part of the state in moderate drought or worse.

After a 2020 fire season that Janet Ruiz, Triple-I’s California-based director of strategic communications, called “anything but normal,” this year’s season may be even worse.

Warmer spring and summer temperatures, reduced snowpack, and earlier spring snowmelt create longer, more intense dry seasons that make forests more susceptible to wildfire. The fire season’s length is estimated to have increased by 75 days across the Sierras and seems to correspond with an increase in the extent of forest fires across the state.

“Hots are getting hotter”

California Gov. Gavin Newsom recently expanded a drought emergency declaration while seeking more than $6 billion in multiyear water spending.

“The hots are getting a lot hotter in this state, the dries are getting a lot drier,” he said. “We have a conveyance system, a water system, that was designed for a world that no longer exists.”

California Insurance Commissioner Ricardo Lara has called for property insurers across the state to play a larger role in boosting wildfire preparedness among homeowners and businesses by providing more wildfire mitigation incentives. He spotlighted eight insurance companies in the state and the California FAIR Plan, which offer discounts to policyholders that have taken adequate steps to harden homes and mitigate wildfire risk.

This group represents only 13 percent of the state market, and Lara hopes the figure will rise significantly this year.

“Insurance companies support and echo Commissioner Lara’s call for mitigation,” Mark Sektnan, vice president of American Property Casualty Insurance Association (APCIA), said in a statement on behalf of APCIA, the Personal Insurance Federation of California (PIFC), and the National Association of Mutual Insurance Companies (NAMIC).  “Insurers are working with scientists and modelers to further the science of understanding how to better mitigate wildfire risk and understanding the value of various mitigation programs and efforts. While we cannot stop wildfires, we are learning how to mitigate the risks and are moving towards understanding and quantifying the value of individual and community mitigation. Insurers encourage homeowners, renters and businesses to get their property and finances ready for wildfires, as we are facing another dry, hot summer.”

Mostly caused by people

As much as 90 percent of wildland fires in the United States are caused by people, according to the U.S. Department of Interior. Some human-caused fires result from campfires left unattended, the burning of debris, downed power lines, negligently discarded cigarettes and intentional acts of arson. The remaining 10 percent are started by lightning or lava.

The Insurance Institute for Business and Home Safety provides recommendations for reducing the likelihood of your home catching fire, including noncombustible siding, decking and roofing materials; covered vents; and fences not connected directly to the house. In addition, combustible structures in the yard such as playground equipment should be at least 30 feet away from the house and vegetation 100 feet away.

But given weather, climate, and population trends, more than individual planning and risk transfer through insurance will be required to head off wildfire risk and bounce back from events. Innovation and a resilience mindset on the part of governments, businesses, homeowners, and communities will need to take hold.

Want to learn more about wildfire mitigation and resilience? Register for “Wildfire Ready: How Do You Prepare Your Home and Finances for Wildfires?” on May 20 at 10 a.m. (PT)