Category Archives: Flood Insurance

Disaster Preparedness, Disaster Resilience, Flood Insurance, Floods

Triple-I Brief Highlights Rising Inland Flood Risk

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The devastation wrought by Hurricane Helene in September 2024 across a 500-mile swath of the U.S. Southeast highlighted the growing vulnerability of inland areas to flooding from both tropical storms and severe convective storms, according to the latest Triple-I “State of the Risk” Issues Brief.

These events also highlight the scale of the flood-protection gap in non-coastal areas. Private insurers are stepping up to help close that gap, but increased homeowner awareness and investment in flood resilience across all co-beneficiary groups will be needed as more and more people move into harm’s way.

Helene dumped 40 trillion gallons of water across Florida, Georgia, the Carolinas, Virginia, and Tennessee, causing hundreds of deaths and billions in insured losses. Much of the loss was concentrated in western North Carolina, with parts of Buncombe County – home to Asheville and its historic arts district – left virtually unrecognizable. Less than 1 percent of residents in Buncombe County had federal flood insurance when Helene struck.

The experience of these states far inland echoed those of New York, New Jersey, and Pennsylvania in August 2021, when remnants of Hurricane Ida brought rains that flooded subways and basement apartments, with more than 40 people killed in those states.

“The whole swath going up the East Coast” that Hurricane Ida struck in the days after it made landfall “had less than 5 percent flood insurance coverage,” said Triple-I CEO Sean Kevelighan at the time. 

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. Flooding led to 39 fatalities and federal disaster-area declarations for 13 eastern Kentucky counties. According to the Federal Emergency Management Agency (FEMA), only a few dozen federal flood insurance policies were in effect in the affected areas before the storm. 

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.

Private insurers stepping up

More than half of all homeowners with flood insurance are covered by NFIP, which is part of FEMA and was created in 1968 – a time when few private insurers were willing to write flood coverage. In recent years, however, insurers have grown more comfortable taking on flood risk, thanks in large part to improved data and analytics capabilities.

The private flood market has changed since 2016, when only 12.6 percent of coverage was written by 16 insurers. In 2019, federal regulators allowed mortgage lenders to accept private flood insurance if the policies abided by regulatory definitions. The already-growing private appetite for flood risk gained steam after that. Private insurers are gradually accounting for a bigger piece of a growing flood risk pie.

Insurance necessary – but not sufficient

Insurance can play a major role in closing the protection gap, but, with increasing numbers of people moving into harm’s way and storms behaving more unpredictably, the current state of affairs is not sustainable. Greater investment in mitigation and resilience is essential to reducing the personal and financial losses associated with flooding.

Such investment has paid off in Florida, where the communities of Babcock Ranch and Hunters Point survived Hurricanes Helene and Milton relatively unscathed. Babcock Rance made headlines for sheltering thousands of evacuees from neighboring communities and never losing power during Milton, which devastated numerous neighboring cities and left more than three million people without power.

Both of these communities were designed and built in recent years with sustainability and resilience in mind.

Incentives and public-private partnership will be critical to reducing perils and improving insurability in vulnerable locations. Recent research on the impact of removing development incentives from coastal areas can improve flood loss experience in the areas directly affected by the removal of such incentives, as well as neighboring areas where development subsidies remain in place.

Learn More:

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

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”

Disaster Resilience, Flood Insurance, Floods

Executive Exchange: Using Advanced Tools
to Drill Into Flood Risk

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Analysis based on precise, granular data is key to fair, accurate insurance pricing – and is more important than ever before in an era of increased climate-related risks. In a recent Executive Exchange discussion with Triple-I CEO Sean Kevelighan, a co-founder of Norway-based 7Analytics discussed how his company’s methodology – honed by use in the oil and gas industry – can help insurers identify opportunities to profitably write flood coverage in what might seem to be “untouchable” areas.

7Analytics uses hydrology, geology, and data science to develop high-precision flood risk data tools.

“We are four oil and gas geologists behind 7Analytics,” said Jonas Torland, who also is the company’s chief commercial officer, “and between us we’ve spent 100 years chasing fluids in the very complicated subsurface.”

Torland believes his firm can bring a new level of refined expertise to U.S. insurers seeking to pinpoint pockets of insurability against flood.

“Instead of analyzing faults and carrier beds, we’re now analyzing streams and culverts and changing land-use features,” Torland told Kevelighan. “I think the approach we bring is brilliant for problems related to climate and population migration and urban pluvial flooding in particular.”

Torland said he hopes his company can help close the U.S. flood protection gap by giving private insurers the comfort levels and incentives they need to write the coverage. While more insurers have been covering flood risk in recent years, the National Flood Insurance Program (NFIP) still underwrites the lion’s share of flood risk.

NFIP’s recently reformed pricing methodology, Risk Rating 2.0 – which aims to make the government agency’s premium rates more actuarially sound and equitable by better aligning them with individual properties’ risk – has created concerns among policyholders whose premiums are rising as rates become more aligned with principles of risk-based pricing.

As the cost of participating in NFIP rises for some, it is reasonable to expect that private insurers will recognize the market opportunity and respond by applying cutting-edge data and analytics capabilities and more refined pricing techniques to seize those opportunities. This is where Torland believes 7Analytics can help, and he noted that the company had already had some positive test results in flood-prone Florida.

Kevelighan agreed that solutions like those provided by 7Analytics are what is needed to help private insurers close the flood insurance gap. Insurers are telling Triple-I as much.

“I think we can all agree that the current way we review flood risk is antiquated,” Kevelighan said. “So we’ve got to bring that new technology, that new innovation to begin changing behaviors and changing how and where we develop and how we live.”

Learn More:

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

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

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

Catastrophes, Disaster Resilience, Flood Insurance, Floods, Risk Management

Accurately Writing
Flood Coverage Hinges on Diverse Data Sources

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Flood risk is not only one of the most destructive perils facing property owners; it is among the most complicated forms of coverage for property/casualty insurers to underwrite. For decades, the private market wouldn’t cover flood risk, which is why the National Flood Insurance Program had to be established.

But improved data collection and the availability of practically unlimited computing power have changed the equation for insurers, according to Anil Vasagiri, senior vice president for property solutions at Swiss Re. In a recent Executive Exchange with Triple-I CEO Sean Kevelighan, Vasagiri discussed the developments that have helped turn flood from a nearly untouchable peril to a burgeoning area of opportunity for insurers.

Over 90 percent of natural catastrophes involve flood in some way or another.  Vasagiri said the ability to use multiple data sources in understanding flood conditions of specific properties helps insurers more accurately underwrite flood and help policyholders proactively address their own exposure to the peril. 

“Increased information leads to increased capacity,” Vasagiri said – a fact that bodes well for improving insurance availability and affordability and evidenced by the increased number of private insurers writing flood coverage since 2016.

The timing of the private market’s increasing appetite for flood risk is fortuitous, as it coincides with Risk Rating 2.0, NFIP’s new pricing methodology that aims to make the government agency’s flood insurance premium rates more actuarially sound and equitable by better aligning them with individual properties’ flood risk. As NFIP rates become more aligned with principles of risk-based pricing, some policyholders’ prices are expected to fall, while many are going to rise.

In the Executive Exchange, Vasagiri discussed the Swiss Re’s acquisition of Fathom – a U.K.-based company specializing in water-related risks – as part of the company’s ongoing commitment to helping close the flood protection gap.

Learn More:

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

Triple-I “Trends and Insights” Issues Brief: Risk-Based Pricing of Insurance

Lee County, Fla., Towns Could Lose NFIP 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

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

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How to Prepare for Hurricane Season

How to File a Flood Insurance Claim

Is Your Business Ready for Peak Hurricane Season?

Coastal Property, Disaster Resilience, Flood Insurance, Floods

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

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Property owners in Lee County, Fla., could lose their flood insurance premium discounts under the National Flood Insurance Program (NFIP) Community Rating System (CRS), according to a recent announcement by FEMA.

CRS is a voluntary program that recognizes and encourages community floodplain management practices that exceed NFIP minimum requirements.  Over 1,500 communities participate nationwide.

FEMA informed leaders in the affected communities – which include Cape Coral, Bonita Springs, Estero, Fort Myers Beach, and unincorporated Lee County – that they would begin losing their discounts starting October 1. Under CRS, these communities currently receive discounts of up to 25 percent. Unincorporated Lee County and the City of Cape Coral get the biggest benefit due to their Class 5 ratings. Rates will increase by approximately $300 annually for the 115,000 homeowners impacted by FEMA’s decision.

“This retrograde is due to the large amount of unpermitted work, lack of documentation, and failure to properly monitor activity in special flood hazard areas, including substantial damage compliance,” FEMA said in a statement. 

FEMA officials told the Miami Herald that the problems began shortly after Hurricane Ian in 2022, when federal teams visited the communities hit the hardest and looked at the properties they thought were most likely to be substantially damaged, including older homes built in flood zones, some with previous flood damage.

“What the team found, unfortunately, is there was a lot of unpermitted work, lack of documentation,” said Robert Samaan, the regional administrator for FEMA’s Region 4, including Florida. “It was just a failure to properly monitor the activity in the special flood hazard area.”

FEMA shared with the Herald three letters it sent Lee County in 2023 — one in February, one in June and one in December — asking for information on the number of damaged homes and warning that not providing the information could result in the county losing its flood insurance discounts.

In recent months, a number of Florida communities, including Miami-Dade County, have benefited from lower flood insurance premiums as a result of improved CRS scores that reflect resilience-related investment. CRS has become particularly beneficial as NFIP pricing reforms – known as Risk Rating 2.0 –that more closely align premium rates with property-specific risks – have contributed to rising premiums for some property owners. Before these reforms, it was not uncommon for lower-risk owners to be subsidizing higher-risk ones through their premium rates.

Rising NFIP rates have been accompanied by another trend: increased involvement by private insurers in the flood insurance market.

“Florida has the most robust private flood insurance market in the United States, which provides consumers with numerous options for coverage,” said Mark Friedlander, director of corporate communications for Triple-I. “Nearly a third of Florida flood policies are written by private carriers, and many private flood insurers offer better pricing and more robust policies than NFIP. It’s worth taking the time to shop for coverage and obtain multiple quotes.”

As recently as 2018, private insurers provided only 3 percent of flood coverage in Florida.

This growth mirrors a national trend. Between 2016 and 2022 the total flood market grew 24 percent – from $3.29 billion in direct premiums written to $4.09 billion – with 77 private companies writing 32.1 percent of the business, up from 18 companies writing 12.5 percent. Private insurers are accounting for a bigger piece of a growing pie.

Florida’s Office of Insurance Regulation has heavily promoted the availability of private flood insurance in the state over the past several years, and many private flood insurers are domiciled in the state, Friedlander said.

“We are committed to helping these communities take appropriate remediation actions to participate in the Community Rating System again and work towards future policy discounts,” FEMA said in its statement.

Earlier this year, Sea Isle City, N.J., had its Class 3 rating restored after a brief demotion in 2023. Sea Isle City and Avalon are the only towns in the state to have Class 3 ratings.

Learn More:

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