Category Archives: Disaster Preparedness

Catastrophes, Disaster Preparedness, Disaster Resilience

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

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By Lewis Nibbelin, Contributing Writer, Triple-I

Earlier this year, baseball-sized hailstones in Denver totaled vehicles and pummeled homes and businesses during the second-costliest hailstorm in Colorado history, equating to billions in damages. Melon-sized stones hit Texas the same month, downing power lines and requiring snow plows to reopen roads.

Hail – a sub-peril of severe convective storms (SCS), which also include thunderstorms with lightning, tornadoes, and straight-line winds – is among the most destructive natural catastrophes in the United States, behind as much as 80 percent of SCS claims in any one year. Yet hailstorms remain ill-monitored and highly unpredictable due to a lack of public and industry attention.

“These are death-by-1000-paper-cut perils,” explained Triple-I’s Non-Resident Scholar Dr. Victor Gensini, meteorology professor at Northern Illinois University and leading expert in convective storm research, in an interview for the All Eyes on Research podcast. “In general, we’re seeing hail on 200 out of 365 days of the year.”

While individual SCS events generating losses on the multi-billion-dollar scale of Hurricane Andrew or Katrina don’t happen, over the course of a given year the losses add up quickly.

SCS, which are rising in frequency and severity – accounted for 70 percent of insured losses globally the first half of 2024, at a billion-dollar sum 87 percent higher than the previous decade average. And in 2023, U.S. insured SCS-caused losses exceeded $50 billion for the first time on record for a single year, propelled by thousands of major hailstorms impacting more than 23 million homes.

Gensini – who was motivated to study atmospheric science after a tornado impacted his high school – shifted his focus away from tornadoes “because hail is way more common across the United States every year, and it has a much larger socioeconomic impact – whether you’re talking about agricultural losses…or just rooftop damage to your asphalt shingles,” he told host and Triple-I Economic Research Analyst Marina Madsen.

“When you take a step back and look at the thunderstorm perils producing the greatest number of insured losses, it’s hail.”

Urbanization and inflation drive these losses, as more people populate disaster-prone areas and the value of their assets and the costs to repair them have increased. The expanding presence of solar farms, spread throughout flat, originally uninhabited plains, are especially susceptible to SCS damage, with one 2019 hailstorm causing $70 million in damages to a solar energy project in Texas.

Another explanation for greater hail-related losses is our warming climate. A Climate and Atmospheric Science study led by Gensini projects that, while higher temperatures will melt more hailstorms overall, increasingly large hailstones will become more common. Stronger updrafts fueled by higher temperatures can suspend stones in the air for longer, spurring further growth.

Such trends do not bode well for insurance premium rates, but upcoming research efforts promise actionable insight into hailstorm detection and prediction. The In-situ Collaborative Experiment for the Collection of Hail in the Plains – or ICECHIP – will send Gensini and several other researchers into the Great Plains to chase and collect granular data from hailstorms next year. Backed by the National Science Foundation with more than $11 million in funding, the field study aims to reduce hail risk through improved hailstorm forecasting, enabling residents to better protect themselves and their belongings before a hailstorm touches down.

A newer initiative – the Center for Interdisciplinary Research on Convective Storms, or CIRCS – is a prospective academic industry consortium to develop multidisciplinary research on SCS risk, fostering resilience and recovery strategies informed by diverse stakeholder partnerships.

“As you can imagine, the greatest interest right now in our research is in the insurance and reinsurance verticals,” Gensini said. “Hopefully, as we continue to build relationships…the [CIRCS] center will serve as a hub for information and knowledge creation for industry members. It’s a really unique consortium and a lot of potential lines of business could benefit from it.”

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Catastrophes, Disaster Preparedness, Disaster Resilience, Flood Insurance

Hurricane Helene Highlights Inland
Flood Protection Gap

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By Lewis Nibbelin, Contributing Writer, Triple-I

Spanning over 500 miles of the southeastern United States, Hurricane Helene’s path of destruction has drawn public attention to inland flood risk and the need for improved resilience planning and insurance purchase (“take up”) to confront the protection gap.

Extreme rainfall and wind inflicted a combination of catastrophic flooding, landslides, and extreme rainfall and wind gusts dumped an unparalleled 40 trillion gallons of water across Florida, Georgia, North Carolina, South Carolina, Virginia, and Tennessee, causing hundreds of deaths and billions in insured losses.

Most losses are concentrated in western North Carolina, with much of Buncombe County – home to Asheville and its historic arts district – left virtually unrecognizable. Torrential rain and mountain runoff submerged Asheville under nearly 25 feet of water as rivers swelled, while neighboring communities were similarly flattened or swept away.

Rebuilding will take years, especially as widespread lack of flood insurance forces most victims to seek federal grants and loans for assistance, slowing recovery. Compounding these challenges, misinformation about assistance from the Federal Emergency Management Agency (FEMA) has impeded aid operations in certain areas, leading FEMA to issue a fact sheet clarifying the reality on the ground.

A persistent protection gap

Less than 1 percent of residents in Buncombe County had federal flood insurance as Helene struck, as illustrated in the map below, which is based on National Flood Insurance Program (NFIP) take-up rate data. Inland flooding isn’t new, and neither is the inland flood-protection gap.

In August 2021, the National Weather Service issued its first-ever flash-flood warning for New York City as remnants of Hurricane Ida brought rains that flooded subway lines and streets in New York and New Jersey. More than 40 people were killed in those states and Pennsylvania as basement apartments suddenly filled with water.

Then, in July 2023, a series of intense thunderstorms resulted in heavy rainfall, deadly flash floods, and severe river flooding in eastern Kentucky and central Appalachia, with hourly rainfall rates exceeding four inches over the course of several days. Subsequent flooding led to 39 fatalities and federal disaster-area declarations for 13 eastern Kentucky counties. According to FEMA, only a few dozen federal flood insurance policies were in effect in the affected areas before the recent storm. 

“We’ve seen some pretty significant changes in the impact of flooding from hurricanes, very far inland,”  Keith Wolfe, Swiss Re’s president for U.S. property and casualty, told Triple-I CEO Sean Kevelighan in a Triple-I Executive Exchange. “Hurricanes have just behaved very differently in the past five years, once they come on shore, from what we’ve seen in the past 20.”

Need for education and awareness

Low inland take-up rates largely reflect consumer misunderstandings about flood insurance. Though approximately 90 percent of all U.S. natural disasters involve flooding, many homeowners are unaware that a standard homeowners policy doesn’t  cover flood damage. Similarly, many believe flood coverage is unnecessary unless their mortgage lenders require it.  It also is not uncommon for homeowners to drop flood insurance coverage once their mortgage is paid off to save money.

More than half of all homeowners with flood insurance are covered by NFIP, which is part of the FEMA and was created in 1968 – a time when few private insurers were willing to write flood coverage.

In recent years, insurers have grown more comfortable taking on flood risk, thanks in large part to improved data and analytics capabilities. This increased interest in flood among private insurers offers hope for improved affordability of coverage at a time when NFIP’s  Risk Rating 2.0 reforms have driven up flood insurance premium rates for higher-risk property owners.  

New tools and techniques

New tools – such as parametric insurance and community-based catastrophe insurance – also offer ways of improving flood resilience. Unlike traditional indemnity insurance, parametric structures cover risks without the complications of sending adjusters to assess damage after an event. Instead of paying for damage that has occurred, it pays out if certain agreed-upon conditions are met – for example, a specific wind speed or earthquake magnitude in a particular area. If coverage is triggered, a payment is made, regardless of damage.

Speed of payment and reduced administration costs can ease the burden on both insurers and policyholders. Alone, or as part of a package including indemnity coverage, parametric insurance can provide liquidity that businesses and communities need for post-catastrophe resilience.

While localized insurance approaches can support flood resilience, coordinated investments in public education and preemptive mitigation are crucial to reducing risk and making insurance more available and affordable. Intergovernmental collaboration with insurers on development zoning and building codes, for instance, can promote the creation of safer and climate-adaptive infrastructure, lowering human and economic losses.

Learn More:

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

Miami-Dade, Fla., Sees Flood Insurance Rate Cuts, Thanks to Resilience Investment

Attacking the Risk Crisis: Roadmap to Investment in Flood Resilience

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

Florida Insurers
Can Weather Another
Big Storm This Season

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Despite warnings from two leading insurance rating agencies that Hurricane Milton weakened or threatened Florida’s recovering home insurance market, the market “can manage losses” from the Category 4 storm “and are ready to cover yet another hurricane,” if one should come this season, according to industry experts who spoke with the South Florida Sun Sentinel.

AM Best and Fitch Ratings each issued reports last week warning that Milton could stretch liquidity of Florida-based residential insurers that are primarily focused on protecting in-state homeowners. But experts closer to Florida’s insurance industry cast doubt on those assertions. One reason is the two companies don’t rate most of the domestic Florida insurers whose financial strength they question, the Sun Sentinel reported.

While cautioning that loss estimates haven’t been released yet from catastrophe modelers, Florida market experts said the state’s insurers have sufficient reinsurance capital to weather not only hurricanes Debby, Helene, and Milton but another Milton-sized storm if one emerges during the latter portion of the 2024 Atlantic season.

Karen Clark, president of catastrophe modeler Karen Clark & Co., told the Sun Sentinel, “Florida insurers and the reinsurers that protect them use sophisticated tools to understand the probabilities of hurricane losses of different sizes.”

Joe Petrelli, president of Demotech – the only rating firm that reviews the financial health of most Florida-based property insurers – said insurers can purchase additional reinsurance capacity if they use up what they purchased to get them through the year.

“Carriers will have catastrophe reinsurance in place for another event, so it should not be an issue,” Petrelli told the Sun Sentinel.

“While we expect Milton to be a larger wind loss event compared to hurricanes Debby and Helene, we do not anticipate it to be near the level of insured losses caused by Hurricane Ian,” Mark Friedlander, Triple-I’s director of corporate communications said.

Ian was a Category 4 major hurricane that made landfall in Southwest Florida in September 2022 and caused an estimated $50 billion to $60 billion in private insured losses. The estimate accounted for up to $10 billion in litigated claims due to one-way attorney fees that were in effect at the time of the storm.

“The market is in its best financial condition in many years due to state legislative reforms in 2022 and 2023 that addressed the man-made factors which caused the Florida risk crisis – legal system abuse and claim fraud,” Friedlander said. “Florida residential insurers also have adequate levels of reinsurance to cover catastrophic loss events like Milton.”

Learn More:

Triple-I “State of the Risk Issues Brief”: Attacking Florida’s Property/Casualty Risk Crisis

Florida Homeowners Premium Growth Slows as Reforms Take Hold, Inflation Cools

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

It’s not too late to register for Triple-I’s Joint Industry Forum: Solutions for a New Age of Risk. Join us in Miami, Nov. 19 and 20.

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

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

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(Photo by Jonathan Sloane/Getty Images)

By Lewis Nibbelin, Contributing Writer, Triple-I

Withdrawing federal subsidies in climate-vulnerable areas can deter development and promote disaster resilience, according to a recent Nature Climate Change study. The study found that these benefits extend beyond the targeted areas.

These findings underscore the utility of land conservation as hazard protection, as well as the critical role financial incentives play in driving – or obstructing – resilience.

A natural experiment

“Empirical research into this question is limited because few policy experiments exist where a clear comparison can be made of ‘treatment’ settings, where incentives for development have been removed, and ‘control’ settings, similar areas where such incentives remain,” the study states. “One such experiment does exist, however.”

The 1982 Coastal Barrier Resources Act (CBRA) rendered more than one million acres along U.S. coasts ineligible for various incentives, including access to flood insurance through the National Flood Insurance Program (NFIP). Though development in these high-risk areas remains legal, the CBRA shifts total responsibility onto property owners to manage that risk.

Decades later, areas under the CBRA have 83 percent fewer buildings per acre than similar non-designated areas, leading to higher development densities in less risky neighboring areas. Subsequent reductions in flood damages have generated hundreds of millions in NFIP savings per year – due not only to NFIP ineligibility in CBRA areas, but also to fewer and less costly flood claims filed in neighboring areas.

Neighboring areas benefit from the natural infrastructure provided by undeveloped wetlands, which can ease flood risk severity by impeding the rate and flow of flooding.

Housing demand a challenge

Despite the evident value of limiting development in high-risk areas, such limitations are challenging to implement during a nationwide affordable housing shortage. Navigating housing demands in tandem with a rise in natural disasters will require a coordinated effort on local, state, and federal levels.

One approach is FEMA’s Community Rating System (CRS), a voluntary program that incentivizes local floodplain management practices exceeding the NFIP’s minimum standards. Class 1 is the 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 have achieved the highest rating: Tulsa, Okla., and Roseville, Calif.

While high ratings are difficult to secure, investments in flood planning yield long-term gains via safer infrastructure and more affordable premiums, with discounts in lower-rated jurisdictions still equating to millions in savings.

CRS discounts are especially advantageous following NFIP’s Risk Rating 2.0 reforms and increased private-sector interest in flood risk. Both have contributed to a more representative and actuarially sound flood insurance market that sets rates based on property-specific risks, thereby raising the premiums of riskier property owners.

Concerns about effective climate risk mitigation strategies persist, however – especially in the wake of unprecedented destruction wrought by Hurricane Helene.

While NFIP reforms are making flood insurance more equitable, many homeowners – including many of those most impacted by Hurricane Helene – are unaware that flood coverage is not offered by a standard homeowners policy. Likewise, many believe that flood insurance is necessary only if required by their lenders, leaving inland residents more susceptible to costly flood damages.

This lack of common knowledge about insurance is not a failure of consumers – rather, it represents the insurance industry’s urgent need to provide greater outreach, public education, and stakeholder collaboration.

Incentivizing public-private collaboration has demonstrated success, so removing federal incentives from additional high-risk areas would require extensive multidisciplinary coordination to prevent inadvertently widening the insurance protection gap. Emerging approaches to risk mitigation and resilience – such as community-based catastrophe insurance, New York City’s recent parametric insurance flood pilot, and the nation’s first public wildfire catastrophe model in California – offer opportunities for fairer rates and targeted local resilience.

If paired with policies based on the CBRA, such innovations could help ensure that appropriate risk transfer occurs alongside substantial risk reduction.

Learn More:

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

Executive Exchange: Using Advanced Tools to Drill Into Flood Risk

Accurately Writing Flood Coverage Hinges on Diverse Data Sources

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

Miami-Dade, Fla., Sees Flood-Insurance Rate Cuts, Thanks to Resilience Investment

Milwaukee District Eyes Expanding Nature-Based Flood-Mitigation Plan

Attacking the Risk Crisis: Roadmap to Investment in Flood Resilience

It’s not too late to register for Triple-I’s Joint Industry Forum: Solutions for a New Age of Risk. Join us in Miami, Nov. 19 and 20.

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

CSU: Post-Helene, 2 More “Above Normal” Weeks Of Storm Activity Expected

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(Photo by Joe Raedle/Getty Images)

As work continues to address the harm inflicted by Hurricane Helene, researchers at Colorado State University (CSU) warn that the next two weeks “will be characterized by [tropical storm] activity at above normal levels.” 

The CSU researchers define “above normal” by accumulated cyclone energy (ACE) of more than 10. This level of hurricane intensity has been reached in less than one-third of two-week periods in early October since records have been kept.

Hurricane Kirk, they wrote, is “extremely likely” to generate more than 10 ACE during its lifetime in the eastern/central Atlantic. Tropical Depression 13 has just formed and is likely to generate considerable ACE in its lifetime across the Atlantic. The National Hurricane Center is monitoring an additional area for formation in the Gulf of Mexico that should be monitored for potential U.S. impacts.

“Hurricane Kirk is forecast to track northwestward across the open Atlantic over the next few days, likely becoming a powerful major hurricane in the process,” said CSU research scientist and Triple-I Non-resident Scholar Phil Klotzbach. “The system looks to generate approximately an additional 20 ACE before dissipation, effectively guaranteeing the above-normal category for the two-week period.”

With more than 160 people confirmed dead in Florida, Georgia, South Carolina, North Carolina, Virginia, and Tennessee,  Helene is now the second-deadliest hurricane to strike the mainland United States in the past 55 years, topped only by Hurricane Katrina in 2005.

Reinsurance broker Gallagher Re predicts that private insurance market losses from Helene will rise to the mid-to-high single-digit billion dollar level, higher than its pre-landfall forecast of $3 billion to $6 billion, according to Chief Science Officer and Meteorologist Steve Bowen.

As always – and with particular urgency in the wake of Helene’s devastation – Triple-I urges everyone in hurricane-prone areas to stay informed, be prepared, and follow the instructions of local authorities. We also ask that people be mindful of the potential for flood danger far inland, as reflected in the experiences of many non-coastal communities during Hurricane Ida and Helene.

Learn More:

How to Prepare for Hurricane Season

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

Hurricanes Don’t Just Affect Coasts; Experts Say: “Get Flood Insurance”

Catastrophes, Coastal Property, Disaster Preparedness, Disaster Resilience, Flood Insurance, Floods, Homeowners Insurance, Legal Environment, Regulation, Wildfire

Triple-I Experts Speak
on Climate Risk, Resilience

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Hurricane Beryl’s rapid escalation from a tropical storm to a Category 5 hurricane does not bode well for the 2024 Atlantic Hurricane season, which is already projected to be of above-average intensity, warns Triple-I non-resident scholar Dr. Philip Klotzbach.

“This early-season storm activity is breaking records that were set in 1933 and 2005, two of the busiest Atlantic hurricane seasons on record,” Dr. Klotzbach, a research scientist in the Department of Atmospheric Science at Colorado State University, recently told The New York Times.

The quick escalation was a result of above-average sea surface temperatures. A hurricane that intensifies faster can be more dangerous as it leaves less time for people in its path to prepare and evacuate. Last October, Hurricane Otis moved up by multiple categories in just one day before striking Acapulco, Mexico, as a Cat-5 that killed more than 50 people.

After weakening to a tropical storm, Beryl made landfall as a Cat-1 hurricane near Matagorda, Texas, around 4 a.m. on July 8, according to the National Hurricane Center, making it the first named storm in the 2024 season to make landfall in the United States.  Beryl unleashed flooding rains and winds that transformed roads into rivers and ripped through power lines and tossed trees onto homes, roads, and cars. Restoring power to millions of Texans could take days or even weeks, subjecting residents who will not have air conditioning to further risk as a sweltering heatwave settles over the state.

Extreme heat was just one climate-related topic addressed by Triple-I Chief Insurance Officer Dale Porfilio in an interview with CNBC’s “Last Call” on July 9. While most farmers are insured against crop damage due to heat conditions and homeowners insurance typically covers wildfire-related losses, Porfilio noted, a “more subtle impact is on roofs that we thought were built to a 20-year lifespan.”

When subjected to extreme heat, roofs can become more brittle and prone to damage from wind or hail.

“So, you have to think about the roof coverage on your home insurance policy,” Porfilio said.

He also pointed out that flood risk represents “one of the biggest insurance gaps in this country. Over 90 percent of homeowners do not have the coverage.”

Many people incorrectly believe homeowners insurance covers flood damage or that they don’t need the coverage if their mortgage lender does not require it.

In an interview on CNBC’s “Squawk Box,” Triple-I CEO Sean Kevelighan discussed the potential impact of the predicted “well above-average” 2024 season on the U.S. property/casualty market.

“This is what the insurance industry is prepared for,” Kevelighan said. “It keeps capital on hand after writing policies to make sure that those promises can be kept.” The P/C industry has $1.1. trillion in surplus as of March 31, 2024.

Kevelighan pointed out that the challenges to the industry go beyond climate-related trends, explaining how legal system abuse, regulatory environments, shifting populations, and inflation are impacting insurers’ loss costs.

In Florida, for example, “you’ve got over 70 percent of all homeowners insurance litigation residing in that state, whereas it represents less than 10 percent of the overall claims.”

He pointed out that Florida’s insurance market has improved – with homeowners insurance premium growth  flattening somewhat – as a result of tort reform legislation and added that Louisiana’s legislature addressed insurance reform during its most recent session.

“In California, insurers can’t catch up with inflationary costs because of regulatory constraints,” Kevelighan noted. “They are not able to model [climate risk] and are not able price reinsurance into their policies.”

California’s wildfire situation is complex, and the state’s Proposition 103 has hindered insurers’ ability to profitably write homeowners coverage in that disaster-prone state. In late September 2023, California Insurance Commissioner Ricardo Lara announced a package of executive actions aimed at addressing some of the challenges included in Proposition 103. Lara has given the department a deadline of December 2024 to have the new rules completed.

Learn More:

Florida Homeowners Premium Growth Slows as Reforms Take Hold, Inflation Cools

Lightning-Related Claims Up Sharply in 2023

Less Severe Wildfire Season Seen; But No Less Vigilance Is Required

Accurately Writing Flood Coverage Hinges on Diverse Data Sources

IRC: Homeowners Insurance Affordability Worsens Nationally, Varies Widely by State

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

2024 Wildfires Expected to Be Up From Last Year, But Still Below Average

CSU Researchers Project “Extremely Active” 2024 Hurricane Season

Triple-I Issues Brief: Hurricanes

Triple-I Issues Brief: Attacking Florida’s Property/Casualty Risk Crisis

Triple-I Issues Brief: California’s Risk Crisis

Triple-I Issues Brief: Legal System Abuse

Triple-I Issues Brief: Wildfires

Triple-I Issues Brief: Severe Convective Storms

Triple-I Issues Brief: Flood

Disaster Preparedness, Disaster Resilience, Wildfire

Less Severe Wildfire Season Seen; But No Less Vigilance Is Required

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By Max Dorfman, Research Writer, Triple-I

This wildfire season is expected to be less intense than normal, but people in high-risk areas should be aware of and prepared for potential damage, according to Craig Clements, a professor of meteorology and climate science at San José State University.

“There are days people really need to be careful,” said Dr. Clements, who directs the Wildfire Interdisciplinary Research Center and is a Triple-I non-resident scholar. “High fire days are typically hot, dry, and windy. If there’s ignition, these fires can spread quickly, depending on the fuel type.”

Despite record-breaking conflagrations across the Northern Hemisphere in recent years, U.S. wildfire frequency (number of fires) and severity (acres burned) have been declining in recent years and in 2023 were among the lowest in the past two decades.

While that trend is positive – reflecting progress in prevention of human-ignited wildfires – it isn’t a reason for complacency.  Another long-term trend has been the doubling of the share of natural catastrophe insured losses from wildfires over the past 30 years, according to Swiss Re. This reflects the impact of a growing number of people living in the wildland-urban interface – the zone of transition between unoccupied and developed land, where structures and human activity intermingle with wildland and vegetative fuels.

A 2022 study in the journal Frontiers in Human Dynamics found that people are moving to areas that are increasingly vulnerable to catastrophic wildfires.

“They’re attracted by maybe a beautiful, forested mountain landscape and lower housing costs somewhere in the wildland-urban interface,” said University of Vermont environmental scientist Mahalia Clark, the paper’s lead author. “But they’re just totally unaware that wildfire is something they should even think about.”

To prepare, people should keep an eye out on the National Weather Service, social media, or watch the news, to ensure they are ready for any potential risks, and be on the lookout for Red Flag Warning days.

Dr. Clements also recommends referring to the National Interagency Fire Center website, which is updated daily for fire risks in particular regions. Triple-I suggests looking into the Wildfire Prepared Home designation program, which helps homeowners take protective measures for their home and yard to mitigate wildfire risks.

It’s also important for homeowners to remember that, following wildfires, rains can result in landslides and debris flows that often are not covered by insurance policies. It’s especially important to understand the difference between “mudslides” and “mudflow” and to discuss your coverage with an insurance professional.

Learn more:

2024 Wildfires Expected to Be Up From Last Year, But Still Below Average

Tamping Down Wildfire Threats: How Insurers Can Mitigate Risks and Losses

Mudslides Often Follow Wildfire; Prepare, Know Insurance Implications

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

Disaster Preparedness, Disaster Resilience, Earthquakes

N.J. Quake a Wake-Up Call for Seismic Mitigation, Resilience Investment

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Residents and police gather outside of homes in Newark, N.J., that were damaged by a 4.8 magnitude earthquake on April 5. (Photo by Spencer Platt/Getty Images)

Last week’s earthquake in Lebanon, N.J.  –  the strongest to hit the state in more than 200 years and which halted activity in New York-area airports and was felt from Washington, D.C., to Maine – highlighted the importance of earthquake preparedness, mitigation, and insurance in areas traditionally not associated with damaging seismic activity.

Earthquake insurance is not covered under a standard homeowners policy. According to A.M. Best, $250 million in direct premiums written for earthquake coverage was in force in Connecticut, New Jersey, and New York in 2023, accounting for less than 5 percent of U.S. earthquake coverage premiums.

Claims from last week’s event are not expected to be excessive.

“Insurers may be anticipating small claims from owners of businesses,” said Janet Ruiz, Triple-I director of strategic communication. “For example, grocery stores, where glass bottles may have fallen from shelves. But the insurance impact is likely to be limited.”

The most significant impact occurred in Newark, N.J., where three multifamily row homes were declared uninhabitable because of potential structural damage, displacing dozens of residents. However, on Saturday morning, the properties were declared structurally safe and residents were allowed to return.

Earthquakes large enough to be felt by a lot of people are relatively uncommon on the East Coast. Since 1950 there have been about 20 quakes with a magnitude above 4.5, according to the United States Geological Survey. That’s compared with over 1,000 on the West Coast.

In 2011, a 5.8 magnitude quake near Mineral, Va., shook East Coast residents over a wide swath from Georgia to Maine and even southeastern Canada. The USGS called it one of the most widely felt quakes in North American history. The quake cost $200 to $300 million in property damages, including to the Washington Monument in D.C., much of it uninsured.

Just as floods can inflict damage in areas not designated by FEMA as “flood zones,” any property where a quake can happen can undergo significant damage. Unlike in earthquake-prone states like California, however, structures typically are not designed or built with seismic events in mind. Homeowners would be well advised to discuss with their insurance professionals whether earthquake coverage is right for them.

Last week’s temblor also should drive awareness of the need for Congress to reauthorize the National Earthquake Hazards Reduction Program (NEHRP) – a federal program that helps mitigate earthquake damage to buildings and communities. The NEHRP expired in September 2023. Bipartisan legislation to reauthorize the program was introduced in January 2024.

“I’ve seen what happens when communities aren’t prepared and haven’t mitigated,” said Dr. Lucy Arendt, a professor with St. Norbert College and Chair of the NEHRP Advisory Committee on Earthquake Hazards Reduction, in a March 7 congressional briefing hosted by the National Institute of Building Sciences (NIBS). “People are displaced from their homes. Schools are closed. Businesses shutter. There’s a lot of trauma.”

Arendt said investment in knowledge, time, and money prior to a severe disaster is significantly less than the cost to help communities recover from a major threat.

“There is a resilience gap between where we are today and where we should be as a resilient nation,” said Daniel Kaniewski, a former FEMA deputy administrator and member of the NIBS Multi-Hazard Mitigation Council. “I saw firsthand the collapse of infrastructure. These are things you might not see because it’s buried underground. But without water and power, that community cannot recover. Lifeline infrastructure needs to be restored quickly and efficiently.”

Most of the built environment is not designed to withstand earthquakes. Communities with weak building codes, older housing stock, unreinforced masonry buildings, and unmitigated hazards will fare worse than others, Kaniewski said.

“This, combined with the potential severe human toll, means that any U.S. earthquake could have catastrophic consequences that would reverberate well beyond the impact zone,” he added. “Damage to manufacturing facilities, transportation nodes, and communications networks and disrupted supply chains would be among the long list of cascading failures. Massive government spending would be necessary” to repair in the aftermath of such an event.

Learn More:

Triple-I Backgrounder on Earthquake Risk

Triple-I Facts & Statistics: Earthquakes and Tsunamis

Earthquakes: You Can’t Predict Them, But You Can Prepare

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

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

CSU Researchers Project “Extremely Active”
2024 Hurricane Season

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Colorado State University hurricane researchers predict an “extremely active” Atlantic hurricane season in their initial 2024 forecast. The team cites record-warm tropical and eastern subtropical Atlantic sea surface temperatures as a primary factor for their prediction of 11 hurricanes this year.

Led by senior research scientist and Triple-I non-resident scholar Phil Klotzbach, Ph.D, the CSU Tropical Meteorology Project forecasts 23 named storms, 11 hurricanes, and five major hurricanes during the 2024 season, which starts on June 1 and continues through Nov. 30. A typical Atlantic season has 14 named storms, seven hurricanes, and three major hurricanes.

The 2023 season produced 20 named storms and seven hurricanes. Three reached “major hurricane” intensity. Major hurricanes are defined as those with wind speeds reaching Category 3, 4 or 5 on the Saffir-Simpson Hurricane Wind Scale.

“We anticipate a well above-average probability for major hurricanes making landfall along the continental United States coastline and in the Caribbean this season,” Klotzbach said. “Current El Niño conditions are likely to transition to La Niña conditions this summer/fall, leading to hurricane-favorable wind-shear conditions. Sea surface temperatures in the eastern and central Atlantic are currently at record-warm levels and are anticipated to remain well above average for the upcoming hurricane season. A warmer-than-normal tropical Atlantic provides a more conducive dynamic and thermodynamic environment for hurricane formation and intensification.”

One hurricane and two tropical storms made continental U.S. landfalls last year. Category 3 Hurricane Idalia struck Florida’s Big Bend region near Keaton Beach on Aug. 30 with wind speeds of 115 mph. It was the third hurricane, and second major hurricane, to make a Florida landfall over the past two seasons. Idalia caused storm surge inundation of 7 to 12 feet and widespread flooding in Florida and throughout the Southeast. 

“The widespread damage incurred from Idalia last year highlighted the importance of being financially protected from catastrophic losses – and that includes having adequate levels of property insurance and flood coverage,” said Triple-I CEO Sean Kevelighan. “Beyond Florida, we saw significant impacts from Idalia in southern Georgia and the Carolinas. All it takes is one storm to make it an active season for you and your family, so it is time to prepare as the 2024 Atlantic hurricane season’s start nears.”

With this forecast in mind, now is ideal time for homeowners and business owners to review their policies with an insurance professional to ensure they have the right amount and types of coverage. That includes exploring whether they need flood coverage, which is not part of a standard homeowners, condo, renters or business insurance policy.

Flood policies are offered through FEMA’s National Flood Insurance Program (NFIP) and dozens of private insurers.

Homeowners also can make their residences more resilient to windstorms and torrential rain by installing roof tie-downs and a good drainage system. Installation of a wind-rated garage door and storm shutters also boost a home’s resilience to a hurricane’s damaging winds and may generate savings on a homeowner’s insurance premium.

Private-passenger vehicles damaged or destroyed by either wind or flooding are covered under the optional comprehensive portion of an auto insurance policy.

Learn More:

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

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

FEMA Highlights Role of Modern Roofs in Preventing Hurricane Damage

Hurricanes Drive Louisiana Insured Losses, Insurer Insolvencies

INFOGRAPHICS

What are Hurricane Deductibles?

How to Prepare for Hurricane Season

How to File a Flood Insurance Claim

Is Your Business Ready for Peak Hurricane Season?

Coastal Property, Disaster Preparedness, Disaster Resilience, Flood Insurance

Coastal New Jersey Town Regains Class 3 NFIP Rating

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Sea Isle City, N.J., has regained its Class 3 rating under FEMA’s National Flood Insurance Program (NFIP) Community Rating System (CRS) after a brief demotion last year. Being rated Class 3 enables the coastal town’s property owners to receive a 35 percent discount on their federal flood insurance.

CRS is a voluntary incentive-based program designed to encourage strong floodplain management. Class 1 is the highest rating, enabling residents to obtain a 45 percent reduction in their premiums. Class 10 indicates that a community doesn’t participate in CRS. To date, only two of the 1,500 participating communities nationwide have achieved the highest rating: Tulsa, Okla., and Roseville, Calif.

High ratings are not easy to obtain or maintain. Sea Isle City first reached Class 3 in 2018, and the rating was briefly lowered to Class 4 last year after points awarded to communities after Superstorm Sandy expired. The city quickly regained Class 3 status through additional flood-management activities.

In the mid-1990s, conditions were so bad for Sea Isle City that it was nearly ejected from the NFIP. If this had happened, property owners wouldn’t have had access to federal flood insurance. Neil Byrne, the city’s floodplain manager, construction official, building sub-code official, and zoning officer, attributes the improvement to strengthened zoning ordinances that require structures to be elevated higher than FEMA recommends, as well as investment in berms and bulkheads.

“The history of Sea Isle City going from facing expulsion from the NFIP to now leading the charge in the CRS in New Jersey is truly inspirational,” said Thomas Song, FEMA resiliency specialist.  “What does not get enough attention is that success in the CRS program has to start with a strong understanding of the day-to-day compliance with NFIP requirements. It is extremely difficult to advance in CRS status without a strong foundation in floodplain-management practices.”

Achieving higher CRS rankings has become something of a friendly competition among coastal New Jersey towns, and only one other New Jersey community – Avalon – has a Class 3.

“Both Sea Isle City and Avalon have demonstrated their commitment in planning for future flooding, implementing higher building standards, and engaging in extensive public outreach,” Song said. “These efforts create an environment geared towards reducing flood damage and enhancing the safety and well-being of residents.”

As NFIP – through its Risk Rating 2.0 reforms – attempts to better align premium rates with risk, CRS discounts become even more significant to owners in flood-prone communities.

Last year, 17 Florida jurisdictions achieved Class 3 ratings. In Cutler Bay – a town on Miami’s southern flank with about 45,000 residents – the average premium dropped by $338. Citywide, that represented a savings of $2.3 million. In January 2024, Miami-Dade County became the latest municipality in the flood- and hurricane-prone state to achieve Class 3, leapfrogging from Class 5 due to the county’s flood-mitigation investments.

Meanwhile, back in New Jersey, Byrne says Sea Isle City hopes to become the state’s first Class 2 community.

“It’s very hard to get to the next level,” he said, but adds that flood pumps could help the city over the hump.

“Ninety-nine percent of our flooding is tidal flooding,” Byrne said, referring to inundation that happens during high tide events. “A lot of it goes away on its own, but we have little areas that need help getting the water out.”

About 90 percent of all U.S. natural disasters involve flooding. For decades, NFIP was practically the only available option for homeowners to obtain flood coverage. Before Risk Rating 2.0, however, coverage for higher-risk properties was often unfairly subsidized by lower-risk property owners.

In recent years, improved data, analysis, and modeling have helped drive increased private-sector interest in flood risk. This, combined with the NFIP reforms, should foster a more competitive flood insurance market in which coverage is both more available and more fairly priced.

“Collective responsibility and multi-disciplinary collaboration are necessary to build resilience around climate-related perils like flood,” said Triple-I CEO Sean Kevelighan. “FEMA’s CRS program is just one example of how communities can make themselves safer and save money through targeted investments that reduce the likelihood and size of catastrophic losses.”

 Learn More:

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

FEMA Reauthorization Session Highlights Importance of Risk Transfer and Reduction

Miami-Dade, Fla., Sees Flood-Insurance Rate Cuts, Thanks to Resilience Investment

FEMA Incentive Program Helps Communities Reduce Flood Insurance Rates for Their Citizens

Proposed Flood Zone Expansion Would Increase Need for Private Insurance