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.
The National Hurricane Center forecasts Hurricane Laura to reach Category 4 intensity later today. A ‘life-threatening’ storm surge of 10 to 15 feet is predicted, one of the worst in years, along with destructive winds. The storm is poised to strike the upper Texas coast and western Louisiana. Hurricane and storm surge warnings have been issued for much of this zone.
If you live in an area ordered to evacuate, leave now. Do not attempt to ride out the storm. Take your insurance contact information and home inventory with you.
In an analysis based on the assumption that Hurricane Laura would come ashore on the Louisiana coast as a Category 3 storm, CoreLogic, a catastrophe modeling firm, warns that nearly 432,000 single-family and multi-family homes along the coasts of Texas and Louisiana could be damaged from storm surge. According to the analysis, Laura threatens approximately 431,810 homes with a combined reconstruction value of approximately $88.63 billion.
Said Tom Larsen, principal, insurance solutions at CoreLogic, “The coincidence of two catastrophes—a damaging hurricane season and the ongoing global pandemic—underscores the importance of the correct valuation of reconstruction cost, one of the core tenets of property insurance.”
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.
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
Insured losses related to civil disorder in 2020 are on their way toward a level not seen since 1992, according to estimates by insurance industry analysts.
On May 26, 2020, protests and riots broke out in response to the death of George Floyd while in Minneapolis police custody and spread to another 140 U.S. cities. By June 4, at least 40 cities in 23 states had imposed curfews, and rioting resulted in at least six deaths. National Guard were called in at least 21 states and Washington, D.C.
Property Claim Services (PCS) a unit of a Verisk Analytics, has designated the Minneapolis riots a catastrophe. This was the first time PCS has compiled insured losses for a civil disorder event since the Baltimore riots of April 2015. Insured losses in the Baltimore unrest – following the funeral for Freddie Gray, a 25-year-old who died in police custody – fell short of $25 million when it occurred, PCS’s threshold for a catastrophe.
The 2020 activity, spanning May 26 through June 8 and including more than 20 states with significant losses, is the first time since 1992 that PCS has declared a civil disorder event a catastrophe. The 1992 riots in Los Angeles, after a jury acquitted Los Angeles Police Department officers for using excessive force in the arrest and beating of Rodney King, caused $775 million in insured losses, according to PCS – or about $1.4 billion in 2020 dollars.
Insured losses for the most recent event are not yet available from PCS. Preliminary estimates from industry analysts put the losses in the range of $500 million to $900 million.
Those estimates will likely change as insurers are resurveyed and data is refined.
With protests and clashes with police continuing in Portland, Ore., and elsewhere, and President Trump threatening to send federal troops to quell the disorder in some cities, no end seems to be in sight for this costly string of civil disturbances.
Insured losses associated with 2018’s Hurricane Michael reached almost $7.44 billion, according to a recent Florida Office of Insurance Regulation (FOIR) update. The losses consist of residential and commercial property, private flood and business interruption insurance, and miscellaneous coverages. There were 149,773 claims made, and 89 percent of them were closed.
Hurricane Michael became a Category 5 storm on October 10, 2018, and made landfall near Mexico Beach, Florida, in the Florida Panhandle. It was the strongest hurricane to ever hit the Florida Panhandle and the second known Category 5 landfall on the northern Gulf Coast, according to the National Oceanic and Atmospheric Administration. It was the first Category 5 storm to make landfall in the United States since Hurricane Andrew in 1992.
An Artemis analysis of the FOIR report says that based on the run-rate of costs per claim (around $65,890 per claim), another $1 billion could be added to the total before every claim is closed down and that many of the claims remaining open will be among the more costly. Fewer than 69 percent of commercial property claims are closed, compared to almost 89 percent of residential. Business interruption claims are also slow to close and therefore are likely to increase the total.
Financial information such as bank, savings and retirement account numbers and recent tax returns
Home inventory
Unfortunately, though, if you are told to evacuate it will be too late to search the house for all this stuff. When authorities tell you to leave you must leave immediately. The fire could be on you in moments.
Cyberrisk is often compared with natural catastrophe-related threats, but a recent study by global reinsurer Guy Carpenter and analytics firm CyberCube suggests a better analogy is with terrorism.
“Probability is assessed in terms of intent and capability.”
The report – Looking Beyond the Clouds: A U.S. Cyber Insurance Industry Catastrophe Loss Study – quotes Andrew Kwon, lead cyber actuary for Zurich: “Extending the lessons learned from property cats to the cyber space is intuitive and logical, but cyber continues to be a unique force unto itself. A hurricane does not evolve to bypass defenses; an earthquake does not optimize itself for maximum damage.”
This passage resonated as I read it because a few hours earlier I’d been reading a FreightWaves article about risks posed to international shipping by digitalization and pondering the fact that the same technology that helps vessels anticipate and avoid adverse weather also subjects them – and the goods they transport – to a panoply of new risks.
The FreightWaves article quotes U.S. Navy Captain John M. Sanford – who now leads the U.S. Maritime Security Department within the National Maritime Intelligence Integration Office – describing how the NotPetya virus inflicted $10 billion of economic damage across the U.S. and Europe and hobbled company after company, including shipping giant Maersk, in 2017.
Sanford said Russian military intelligence was behind the hacker group that spread NotPetya to damage Ukraine’s economy. The virus raced beyond Ukraine to machines around the world, crippling companies and, according to an article in Wired, inflicting nine-figure costs where it struck.
“Maersk wasn’t a target,” Sanford said. “Just a bystander in a conflict between Ukraine and Russia.”
Collateral damage.
The FreightWaves article describes how supply chains, ports, and ships could be disrupted more intentionally through GPS and Electronic Chart Display and Information System (ECDIS) systems onboard ships, or even via a WiFi-connected printer: “Pirates working with hackers could potentially access a ship’s bridge controls remotely, take control of the rudder, and steer it toward a chosen location, avoiding the expense and danger of attacking a vessel on the high seas.”
The Carpenter/CyberCube report identifies parallels in the deployment of “kill chain” methodologies in both conventional and cyber terrorism: “Considering terrorism risk in terms of probability and consequence, probability is assessed in terms of intent and capability.”
As our work and personal lives become increasingly interconnected through e-commerce and smart thermostats and we look forward to self-driving cars and refrigerators that tell us when the milk is turning sour, these considerations might well give us pause.
Hurricanes, earthquakes, fires, and floods might be scary, but at least we never had to worry that they were out to get us.
As of Saturday evening, Hurricane Dorian is making a big right hand turn, moving the storm’s threat north.
So now it seems Georgians and South Carolinians are facing the evacuation dilemma: stay or go?
I’ve been there. In 1992, Hurricane Andrew was heading arrow straight for the border between Broward and Miami-Dade counties. We lived a mile north of that.
We boarded the house up as best we could, moved our valuable stuff (a lamppost, a stereo, a rocker we bought on our honeymoon) into the downstairs bathroom, where it would be best protected. And we sat on our couch and cried. We knew what we owned was junk, but it was our junk. It was everything we had, and we knew we would never see it again.
Then we left.
Too many people take the chance and stay behind. Travelers Insurance surveyed people living in hurricane-prone states. The survey found:
Men (23%) were more likely than women (11%) to ignore a mandatory evacuation order.
Millennials (21%) were more likely to ignore an order than Gen Xers (16%) or Baby Boomers (11%).
People in the most cane-prone states (Florida, Louisiana, Texas’ Gulf Coast) were the stubbornest. Georgians, Alabamians, Mississippians, Virginians and North Carolinians were most likely to heed the order.
Back in 1992, my wife and I were lucky. Hurricane Andrew drifted south, and we returned to a home intact.
Even so, we made the right decision, and I’d urge anyone in the same position now to leave. After all, insurance can help you recover the stuff you’ve lost. But no one can replace you.
I.I.I. has some tips for what to do when a hurricane threatens.
