Category Archives: Floods

Disaster Resilience, Floods, Insurance Industry

Understanding FEMA and other flood maps

Leave a comment

On June 29 the First Street Foundation, a nonprofit research firm, released an analysis of flood risk which shows that nearly 6 million of the nation’s properties are at more substantial risk of flooding than indicated by the Federal Emergency Management Agency’s (FEMA) maps.

FEMA replied with a statement that its maps are intended for floodplain management and decisions about emergency responses and that its flood insurance risk maps do not conflict with First Street’s maps since the two complement one another by showing different types of risk.

To help explain how flood maps work, Dr. Michel Léonard, Vice President & Senior Economist, Triple-I, wrote the following post.

Flood maps are used to identify and communicate a property’s exposure to flood. 

Flood maps rank exposure from lowest to highest by categorizing an area into a set of standardized flood zones, with each zone assigned its own flood exposure level. Flood exposure is normally expressed as a percentage representing flood frequency and/or severity over a specific number of years. This approach is similar to maps for other natural perils. 

The most commonly used flood map is FEMA’s nationwide flood map. There are also several high-quality flood maps from academia, non-profits and businesses, each providing added perspectives. These maps aren’t meant to be better than one another but rather, together, to provide a fuller understanding of the risks caused by floods to homeowners, businesses, and communities.

First Street’s flood map is an example of such maps: scientific, credible, and insightful in its contribution to the discussion about current and changing flood exposure. Its main insight, that flood risk and exposure may be higher than currently implied by FEMA’s or other maps, is not a controversial statement but rather adds to the growing consensus across flood experts that flood risk is increasing in frequency and severity nationwide as a result of extreme weather events. FEMA recommends reviewing its own flood map every year due to exposure changing over time. 

The main takeaway from flood maps for consumers and businesses is learning about their own relative exposure vis-à-vis other locations. Homeowners and businesses should use flood maps to better understand their current exposure and determine, for example, whether their property insurance is adequate or considering preemptive risk mitigation. 

Homeowners and businesses thinking about moving should look at these maps before deciding about where to go. Will they be more or less exposed to flood?  How will the new location’s flood exposure impact their mortgage, their insurance costs?

That said, while all flood maps provide insight into flood exposure, FEMA’s flood map remains different from others. As a government provided flood map, it is a countrywide benchmark for flood risk identification and quantification. It is used by different levels of government, regulators, first responders and insurance companies. For example, homeowners and businesses should know that a property’s location within a specific FEMA flood map zone is the sole benchmark for mortgage lenders requiring flood insurance in order to get a mortgage. 

For more about FEMA’s flood map see: www.floodsmart.gov/flood-map-zone/about

Disaster Preparedness, Disaster Resilience, Floods

Triple-I Paper Looks at Convective Storms, Mitigation, and Resilience

Leave a comment

Severe convective storms—tornadoes, hail, drenching thunderstorms with lightning, and damaging straight-line winds—are among the biggest threats to life and property in the United States. They were the costliest natural catastrophes for insurers in 2019, and this year’s tornado season is already shaping up to be the worst in nearly a decade.

A new Triple-I paper describes how population growth, economic development, and possible changes in the geography, frequency, and intensity of these storms contribute to significant insurance payouts. It also examines how insurers, risk managers, individuals, and communities are responding to mitigate the risks and improve resilience through:

  • Improved forecasting,
  • Better building standards,
  • Early damage detection and remediation, and
  • Increased risk sharing through wind and hail deductibles and parametric insurance offerings.

The 2020 tornado season coincided with most of the U.S. economy shutting down over the coronavirus pandemic. This could affect emergency response and resilience now and going into the 2020 hurricane season, which already is being forecast as “above normal” in terms of the number of anticipated named storms.

Disaster Preparedness, Floods

FEMA Report Recommends New Mechanisms to Ward Against Natural Disasters

Leave a comment

By Max Dorfman, Research Writer

The U.S. Federal Emergency Management Agency (FEMA) is being pressed to adopt innovative methods to increase insurance penetration for floods and other natural disasters. In a draft report, FEMA’s National Advisory Council suggests that in order to increase financial preparedness for householders and local governments, novel financial models must be considered. The report notably mentions parametric triggers as a way to grow the insurance markets and protect against future disasters. Blockchain is also recommended as a means to create a land and property registry stored off-site in a secure platform.

What are parametric triggers, and how can they help?

Parametric insurance is a type of insurance that agrees—before the triggering event—to make a certain payment, instead of compensating for the pure loss. Parametric insurance pays out immediately when a certain threshold, such as water depth or wind speed, is reached; thus, expediting funding and reducing overall administrative costs.

What does the future hold for this new model?

“When added to the ubiquitous nature of smartphones and other levels of connectivity, the opportunity for expanding parametric insurance protection to individual households may merely be a matter of connecting the dots, for which FEMA is uniquely placed to lead this effort,” the Council’s report states.

Indeed, the Council believes that FEMA should “look towards a new model of insurance” in an age when natural disasters increasingly threaten both public and private interests.

The draft report also includes many suggestions to improve disaster preparedness, such as better building codes and code compliance, better preparedness for Indian tribes and rural communities, building resilient infrastructure and increasing funding for mitigation.

To close the insurance gap the report recommends:

  • Educating the public about the benefits of flood renter’s insurance and hidden hazards in real estate, rental properties and communities.
  • Stress testing state insurance guaranty funds to determine if they can withstand large-scale disasters and insurer insolvencies.
  • Creating more offerings for state and local governments to reduce rates of self-insurance of infrastructure.

 

Floods

Nearly 80 percent of homeowners in coastal Carolinas uninsured for flood

Leave a comment

As Hurricane Dorian churns northward off the coast of South Carolina as a Category 2 storm, the National Hurricane Center continues to forecast dangerous storm surge conditions through the Carolinas, up the coast into Virginia, as of 11 a.m. September 5.

I.I.I. infographic based on Aon estimates of NFIP data

Using National Flood Insurance Program policy takeup rates as estimated by Aon, the six coastal counties in South Carolina average a 28 percent flood insurance takeup rate, compared to a 16 percent takeup rate for the 21 coastal counties in North Carolina. Dare County in North Carolina had the highest takeup rate of both states, with 61 percent, and Hertford County had the lowest in the two states, at 1.0 percent. Overall South Carolina has 204,372 total policies in force, with 2,284,722 housing units statewide. North Carolina has 132,983 policies in force for 4,622,575 housing units statewide.

The graphic below shows the probability of storm-induced flooding for the Carolina coast as of September 5 at 2 p.m. eastern.
For up-to-date flood probability click here.

USGS Coastal Change Hazards Portal

More flood insurance facts and statistics from the I.I.I. are available here.

Floods

Buyer beware: In Barry’s wake, flooded cars are about to hit the used car market, NICB warns

Leave a comment

Getty Images

Hurricane Barry made landfall on July 13 as the first hurricane of the 2019 season, dumping heavy rain on parts of Louisiana, Mississippi and Arkansas. Unfortunately, whenever there’s flooding there are unscrupulous people ready to unload flooded cars onto credulous consumers, and vehicles flooded by Barry may soon appear for sale around the nation.

The National Insurance Crime Bureau (NICB) warns that buyers should be particularly careful in the coming weeks and months as thousands of Barry-damaged vehicles may reappear for sale in their areas. Vehicles that were not insured may be cleaned up and put up for sale with no disclosure of the flood damage, which is illegal.

“When tragedy strikes criminals have the tendency to swoop in and scam consumers especially when it comes to the resale of flooded vehicles,” said Brooke Kelley, communications vice president of the National Insurance Crime Bureau (NICB).

Flood-damaged vehicles can exhibit a host of problems ranging from electrical malfunctions, mold and mildew, corrosion of various parts and slippery brakes. Corrosion can find its way to the car’s vital electronics, including airbag controllers, warns Consumer Reports.

The NICB offer the following tips to avoid being scammed:

  • Don’t rush to buy a used vehicle, especially if the price looks too good to be true.
  • Look for water stains, mildew, sand or silt under the carpet, floor mats, and dashboard, and in the wheel well where the spare is stored. Look for fogging inside the headlights and taillights.
  • Do a smell test. A heavy aroma of cleaners and disinfectants is a sign that someone’s trying to mask a mold or odor problem.
  • Get a vehicle history report. Check a trusted database service. You can check NICB’s free VINCheck database.
  • Have a trusted mechanic inspect the car’s mechanical and electrical components, and systems that contain fluids, for water contamination.

After a disaster, NICB works with its member companies, law enforcement, and auto auction companies to identify the vehicles that have had an insurance claim filed. Most of the vehicles are sold to parts companies who will dismantle them and resell usable parts that were not damaged by the flooding.

The Vehicle Identification Number (VIN) of vehicles that have been damaged by Barry will be searchable through NICB’s free VINCheck® service as well as the National Motor Vehicle Title Information System (NMVTIS) database.

VINCheck allows car buyers to see whether a vehicle has ever been declared as “salvage” or a total loss by an NICB member that participates in the program. Insurers representing about 88 percent of the personal auto insurance market provide their salvage data to the program. It also alerts users if a vehicle has been stolen and is still unrecovered.