Anticipating Hurricane Matthew, 4 States Declare Emergency

matthew-map
Rebounding to Category 4 hurricane classification, Matthew now has winds up to 140 miles per hour and has caused at least 28 deaths in three Caribbean countries. It is heading for the southeastern U.S., where four states—Florida, Georgia, South Carolina and North Carolina—have issued a state of emergency and evacuation orders in coastal regions.

Matthew was a Category 4 hurricane through Tuesday, was downgraded to a Category 3 early on Wednesday, and has now returned to Category 4 strength today, according to the U.S. National Hurricane Center (NHC).

Florida Gov. Rick Scott issued a warning on Thursday urging those in evacuation zones to leave immediately. “Based on the current forecast, the heights of storm surge will be above ground. Waves will be crashing on roofs. Homes will be destroyed,” he tweeted in both English and Spanish on Thursday morning.

“Time is up, Hurricane Matthew is approaching Florida. If you are in an evacuation zone, leave now,” he said in a statement. “To everyone on Florida’s east coast, if you are reluctant to evacuate, just think of all the people the hurricane has already killed.  You and your family could be among these numbers if you don’t take this seriously.”

Scott said that so far more than 4,000 National Guard members have been activated to help with evacuations and sheltering. He tweeted that as of 6:00 a.m., more than 3,000 people were in about 60 shelters. The state offers a mobile app to help those in flood-prone areas find the nearest shelter and also avoid traffic congestion.

A state of emergency has been declared by Georgia’s governor for 13 coastal counties. South Carolina’s governor declared a state of emergency and has begun coastal evacuations that may affect up to 1 million people. Because of heavy traffic, lane reversals on some highways are in effect, and schools and government offices in 25 South Carolina counties are closed today. North Carolina’s governor has declared a state of emergency for more than 50 counties and issued a mandatory evacuation order for Ocracoke Island, AIR Worldwide reported.

The Federal Emergency Management Agency (FEMA) has sent personnel and supplies to all four states, and President Obama is meeting with FEMA officials coordinating the response to Hurricane Matthew at the agency’s headquarters in Washington, D.C.

According to CoreLogic, a Category 3 storm hitting Miami could potentially damage 176,000 homes at a reconstruction cost value (RCV) of about $3.8 billion.

CoreLogic’s Storm Surge Risk Report estimates that more than 6.8 million homes located along the Gulf and Atlantic coasts are at risk of storm surge damage, with a total RCV of about $1.5 trillion.The length of coastline, coastal elevation and density of residential development all contribute to the risk of storm surge flooding.
core-logic-1

According to CoreLogic, the total number and total value of residential properties for the four states currently bracing for Hurricane Matthew are:

Total Number and Total Value of Residential Properties by State

Small Villages Hit Hardest by Italian Earthquake

A strong 6.2 magnitude earthquake that stuck Central Italy in the early morning hours of Aug. 24 has caused about 250 deaths and hundreds of injuries. The temblor stuck 10km (6.2 miles) southeast of Norcia and 100km (62.13 miles) northeast of Rome. Areas with the most damage are smaller, older towns consisting of unreinforced masonry buildings. One such town was Amatrice, which the town’s mayor has said “no longer exists.”

Dozens of aftershocks have since occurred in the area—the strongest a magnitude 5.5. Because it was a shallow quake, occurring about six miles below the surface, it was more destructive, the New York Times reported.
Italy map

Map: USGS.gov

The vicinity of Wednesday’s temblor has also experienced significant earthquakes in the past, including one with a magnitude of 6.3 near the town of L’Aquila in 2009. According to the Times. That quake killed at least 295 people, injured more than 1,000 and left 55,000 homeless. Bloomberg reported that only about 2% of the economic loss from the 2009 quake was insured.

Catastrophe modeling firm AIR Worldwide said that Italy’s nonlife insurance market is the eighth-largest in the world and the fifth largest in Europe, and its property insurance market is the second-largest nonlife market in the country after automobile. Earthquake coverage, however, is often not included in standard homeowners’ policies and is typically issued as an extension of fire policies. Earthquake coverage for industrial and commercial structures may be offered for an additional premium, which varies by region.

Fitch Ratings said on Aug. 26 that it expects to see limited impact on Italian insurers. According to Fitch:

We estimate insured losses of EUR100 million-EUR200 million, arising mainly from property lines. Our estimate reflects the low density of population and businesses and limited insurance coverage in the region. Claims of this magnitude would not have a material impact on Italian insurers’ underwriting results or credit profiles. Italian non-life insurers wrote EUR2.3 billion of gross written premiums of property insurance in 2015.

Italy has declared a state of emergency in the region hit by the earthquake and the government has pledged EUR50 million for first aid. The declaration of a state of emergency means that certain losses will be covered by a state fund for emergencies, limiting losses for insurers.

We expect the insured losses to be EUR40 million-EUR80 million for primary insurers and EUR60 million-EUR120 million for reinsurers. A similar event that struck a nearby area in 2009, where the insurance exposure was higher, caused insured losses of around EUR250 million.

Planning for Extreme Floods

Flooding

Companies in the United States should begin preparing now for climate change, which is predicted to cause extreme weather conditions, according to FM Global’s report, The Impact of Climate Change on Extreme Precipitation and Flooding. As the climate warms, areas that are dry will become drier and moist areas will see higher precipitation. The characteristics of precipitation will also change. “We feel cli­mate change not so much through subtle changes in the mean, but through changes in the extremes,” MIT Prof. Kerry Emanuel said in the report.

While the overall amount of precipitation might remain the same, it will become less frequent but more intense. A specific region of the country that has historically seen 10 inches of rain each May might see the same volume that month, for example, but those 10 inches may occur in a much shorter period of time, increasing the risk of flooding, according to the study.

By the end of the century, as temperatures rise, it is possible for precipitation to change by 8%, which could exacerbate wildfires in some areas and flooding in others. The danger is that, because these extreme events are infrequent, they lack urgency, so planning can easily be put off. Risk managers are advised to check their facility’s resilience in terms of the building’s ability to withstand flooding, focusing on 500-year flood levels rather than 100-year.

Extreme wet or dry conditions can affect a company’s buildings, machinery, data centers, transportation networks, supply chains, people and sales. Organizations should focus on water management—diverting water from property, optimizing drainage and protecting water supplies, and they should consider new weather extremes when managing supply chains.

Flood hazard mapping is increasingly proving helpful as understanding of water risk is improving, Louis Gritzo, vice president and manager of research with FM Global, wrote in “Mitigating Evolving Water Threats,” from this month’s Risk Management Magazine. Advances in technology have led to improvements in weather satellites, geospatial data acquisition and physical model development, making old models obsolete. Anyone working with information from a flood map that is more than 15 years old should consider an update, he wrote.

Those with a flood map should make sure it includes potential coastal flooding areas as well as river flooding, also taking into account the local topography of coastal locations. “Areas along the coast that are surrounded by hills and mountains will likely experience far more wind-blown water (storm surge), as the local terrain directs more water in spaces between steeper slopes,” Gritzo wrote.

Midwest Tornado Insured Losses Could Top $1B

A series of tornadoes in the Midwest on Sunday that killed six, levelled homes and businesses and left tens of thousands without power may top $1 billion in insured losses, according to risk modeller RMS.

The New York Times reported that on Nov. 18, Illinois Governor Pat Quinn declared seven counties disaster areas and said he would seek relief funding from state and federal agencies. He also said the series of tornadoes were the deadliest to occur in the state in November.

Matthew Nielsen, director of model product management at RMS said in an email that while damage estimates are far from final, “There is a good chance that Sunday’s outbreak will likely rank as one of the top five most significant November outbreaks since 1950.”

The magnitude and severity of the tornado outbreak was driven by two factors, he said, “Unseasonably strong thermodynamic instability and unusually strong wind shear throughout the depth of the atmosphere.”

Robert P. Hartwig, Ph.D., president of the Insurance Information Institute said from the Chicago airport, en route to assess the tornado damage first hand, that there is “No question that it will at least be the second costliest tornado event of the year.” The largest event this year was the Moore, Okla., tornadoes, which approached $1.6 billion in insured losses. By comparison, damage from the Midwest tornadoes is spread over a wider area, impacting Illinois, Michigan and Indiana.

“There are thousands of damaged structures throughout the states that were hit—residential and commercial,” he said. “What’s difficult to tell at this point is the extent of commercial damage and that can really drive up the losses. Not only are commercial structures more expensive, but there is often a business interruption component as well.”

He explained that insured losses for tornadoes are typically higher than those for floods. Because there was no flooding involved, more of the losses would be covered by insurance, meaning a faster recovery. “The vast majority of property owners here are going to have insurance coverage. Uninsured losses may include some business interruption loss, vehicles that didn’t carry comprehensive coverage and uninsured structures,” he said.

As is generally the case after tornadoes, “Most people will be getting checks [from their insurers] very quickly, which will help them with temporary living expenses. It will also help them make initial repairs more quickly and provide funds for debris removal so that rebuilding can start,” Hartwig said.