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Hurricane Laura Damage Could Total Billions

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Experts now project damage figures could be in the billions of dollars as a result of last week’s Hurricane Laura, the category 4 storm that hit several Caribbean nations as well as Louisiana and Texas in the United States.

Laura was the strongest hurricane to hit Louisiana since 1856, but the damage may end up costing less than previous storms because it did not hit heavily populated cities. In 2005, Hurricane Katrina caused $160 billion in damages, while 2017’s Hurricane Harvey cost $125 billion.

Karen Clarke & Company estimated on August 28 that the damage will total almost $9 billion in the United States, and $200 million in the Caribbean, where it hit Antigua, Cuba, the Dominican Republic and Hispaniola.

CoreLogic put the damage in Louisiana at $8 billion to $12 billion, and estimated that the damage in Texas would total less than $500 million. Moody’s Analytics also provided a preliminary damage estimate of between $4 billion and $7 billion.

According to Louisiana news site The Advocate, State Farm, which has around 278,000 policies in Louisiana, said it had received more than 7,000 claims as of last week. The National Flood Service said Friday that FEMA had received nearly 100 claims for damage caused by Laura.

On Thursday, Louisiana officials announced that over 230,000 residents still do not have power, and 175,000 have water outages. As of September 3, 21 Louisiana residents have died related to the storm, with the Louisiana Department of Health reporting that at least 8 deaths were from carbon monoxide poisoning related to improper generator use.

In a new report, Hurricane Season: More Than Just Wind and Water, the Insurance Information Institute said that losses from hurricanes have risen sharply over the past 16 years, growing quicker than inflation by almost 7%. Citing Aon director and meteorologist Dan Hartung, the III reported that “2017, 2018 and 2019 represent the largest back-to-back-to-back insured property loss years in U.S. history.”

The Institute blamed these rising costs on populations moving to more hurricane-prone areas like Florida and Texas, and building bigger, more expensive houses in those areas. When these houses—and the expensive property in them—are damaged, the insurance payouts are higher.

Additionally, hurricanes have brought significantly more water inland as climate change intensifies, the report noted. These factors have all caused more flooding and more insured property damage. The Institute said that rising hurricane losses, plus claims related to the COVID-19 pandemic, will likely translate into insurance rates increasing in the near future.

Hurricane Laura Leaves Destruction—and Pandemic-Related Recovery Challenges

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Hurricane Laura made landfall in the United States at 1 a.m. on Thursday, hitting Louisiana and Texas as a Category 4 storm with maximum sustained winds of 150 miles per hour and what National Hurricane Center officials called “unsurvivable” storm surge. In such ferocious wind, thousands of homes and businesses were damaged or completely destroyed, hundreds of thousands were left without power and, as of Thursday evening, at least four people had been killed.

While forecasters initially expected the storm to lose intensity before reaching land, it rapidly intensified this week, becoming one of only 10 hurricanes to make landfall in the continental U.S. with winds over 150 mph since modern recordkeeping began in 1851. After windspeeds nearly doubled on Wednesday, officials in Texas and Louisiana ordered several hundred thousand people in the storm’s path to evacuate, but many were either unable to leave or chose not to. Increasingly severe storms in the area in recent years may have left some feeling prepared or resigned to ride out the storm.

Others faced difficulties related to the pandemic. As Risk Management recently reported, many experts have expressed concern that the COVID-19 pandemic could significantly complicate hurricane season this year, increasing the risk to individuals and businesses and making disaster recovery more difficult. Ahead of Laura, NPR reported that emergency shelters had a hard time safely accommodating evacuees without overcrowding and had to direct many to hotels. Pandemic-related job losses may have ruled that option out for some. Mayor Nic Hunter of Lake Charles, which was particularly devastated in the storm, told NPR that he “suspects the coronavirus pandemic and economic hardship are leading many people to take pause.” The outlet also reported that experts are concerned that mass evacuations from the hurricane could lead to new outbreaks in the region.

Now, the recovery process will undoubtedly be impacted by the pandemic as well.

“The global health crisis is going to have a major impact on recovery from any major storm, including Hurricane Laura—the stress of natural disaster becomes more intense when it unfolds against the backdrop of a highly contagious viral outbreak,” John Dickson, president and CEO of flood insurance provider Aon Edge, told Risk Management in the wake of the storm on Thursday.

For example, he said, “If you think back to hurricanes like Katrina (which hit about 15 years ago almost to date) and create a mental image, you see the community banding together to respond in close physical proximity. Similar images emerged from last year’s prolonged flooding along the Missouri River. In those and other events, assembly lines formed to fill and deploy sandbags—a task impossible to do six feet apart.”

Dickson noted that technology increasingly used by insurers (also known as risktech) would be more important than ever in responding to natural disasters this year as emergency response must be balanced with safe social distancing practices.

“Smart phones and basic technology can help homeowners achieve the recommended preparation steps and stay safe during a storm,” he advised. “For example, taking pictures and videos with date and time stamps could minimize the need for on-site inspections and physical proximity to claims adjusters.”

For insurance professionals, he noted, “The insurance industry is thinking through very tactical steps to ensure policies and procedures are in place to protect those who are on the frontlines when a hurricane hits. Drone technology offers the opportunity to take photos remotely, and computer models help better quantify risk and manage work forces.”

For more insight and actionable guidance on risk management for hurricanes and other natural catastrophes, including disaster preparedness, recovery and insurance, check out the following pieces from Risk Management:

Before Disaster Strikes: How to Prepare for Natural Catastrophes
How does an organization ensure it is prepared to minimize losses and recover quickly following a natural disaster? Long before a disaster strikes and property damage occurs, the best response plans begin with careful negotiation and placement of well-defined property coverage. Read more

Key Considerations for Disaster Planning
Meticulous disaster response planning has never been more critical. When developing a plan, it is important to involve key stakeholders and review every step that your business, your network and your vendors must take if a natural catastrophe impedes operations. A strong plan should address these key questions. Read more

Weathering Hurricane Season During the Pandemic
Pandemic-related social distancing guidelines and supply shortages could make it harder for business owners to protect their properties should a storm happen, making it even more important to have an action plan in place. These key considerations can help businesses owners mitigate potential storm risks amid COVID-19. Read more

Understanding Post-Storm Business Interruption Coverage
Whether in the impacted area or beyond, businesses suffering from supply chain disruptions after hurricanes and other storms should look to their property insurance policies for contingent business interruption coverage. Read more

Natural Disaster Planning During COVID-19
As the COVID-19 pandemic continues, government authorities and disaster-response entities are over-extended and may not be able to provide assistance as readily this year. It is more important than ever that companies make backup plans and assess the potential impact of shortfalls in their disaster response protocols. Read more

The Human Element of Disaster Recovery
Crisis and disaster recovery plans offer a critical advantage when catastrophe strikes, helping mitigate the impact on facilities, information systems and equipment. Just as important, however, is considering how a disaster can affect the company’s workforce. Read more

Ensuring Insurance Recovery After a Hurricane Loss
These seven tips can help policyholders resolve disaster insurance claims in the wake of hurricanes and other natural catastrophes. Read more

Hurricane Preparation and Recovery Tips for Businesses

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hurricane dorian disaster preparation

The first Atlantic hurricane of the season is rapidly approaching the mainland United States, with experts currently expecting Hurricane Dorian to make landfall in Florida on Sunday. For businesses both in the storm’s path and beyond, it is important to take the opportunity to consider how to protect property from hurricane damage before and after storms. The Congressional Budget Office estimates that, on average, hurricane damage costs $54 billion annually, and even at this late date, there is always more businesses can do to try to mitigate such losses and damage to their property and operations.

One of the simplest steps is having an accurate replacement cost and business income valuation. If valuations were conducted previously, consider how long it has been and any significant changes, such as assets or location. It is also important to document the property before a storm arrives, including taking photos and videos, or even using 3D-mapping technology to record a detailed account of an entire space, building or structure. Most importantly, confirm with the insurer that the policy is current and that the terms, conditions, and limits are all well understood.

Creating and practicing a detailed disaster plan is another important step. Business owners can use risk modeling programs, which run a range of potential scenarios digitally to flag issues and create a more holistic plan. If digital modeling is unavailable, walking through or rehearsing plans can help identify potential issues. For example, built-in hurricane shutters are great, but if they are not tested ahead of time and then malfunction in the hours before a storm, it may be too late to find an adequate solution. When tailoring the disaster response plan, also consider the available coverage to limit out-of-pocket expenses after a storm. Coordinating with your insurance professional is the best way to minimize uninsured expenses.

One critical factor for any business disaster plan is how to protect data, including business data as well as plans and building layouts. House these valuable documents in a secure location in case of physical damage to the main data storage unit or computer drives. Insurance companies will likely request very specific information to process any claim, so speak with an insurance company adjuster in advance to determine what types of documents they need for filing a claim, then store those in an easily accessible online portal.

Create a business continuity plan that addresses how to expedite recovery or avoid interruption, potentially including employing an off-site workforce, creating an alternative workspace, and locating backup suppliers.

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It should also always include a communication plan so that key players remain connected.
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Business owners should engage with critical vendors and emergency responders in advance to assist with loss mitigation, temporary repairs, and restoration. Following a wide-spread catastrophe, these vendors are in high demand and having a preexisting relationship will help.

Once the storm passes, the first step must be communication: contact everyone to address safety concerns and identify their needs. Phone lines and internet service are often unreliable following a storm, and business owners should be prepared to use multiple forms of communication, from texts to emails and applications that use Wi-Fi.

After reestablishing contact, quickly document the damage (ideally in both photos and videos) since demonstrating the extent and cause of loss becomes increasingly difficult over time. Policyholders should notify their broker and insurance company of the loss immediately, and once damage is documented, policyholders must reasonably and with due diligence preserve and protect property and commence restoration while mitigating future risk. For example, if a structure suffers roof damage, but no action is taken to “reasonably and quickly” provide temporary cover, rain damage following the storm may not be covered as part of the storm’s damage.

Finally, it is critical to log all logistical and monetary details.

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After a hurricane, there may be challenges accessing damaged areas, so retain all notices, civil orders or police mandates concerning any access limitations to later provide the insurance company. An insurance company cannot expect a policyholder to put a tarp on a roof if access was prohibited. Likewise, policyholders should track all expenditures. After a disaster, the price of restoration services can increase dramatically, so acquire and keep multiple estimates of any cleanup, construction, or emergency service needed. Having these estimates will allow policyholders to assert the cost was both reasonable and necessary and receive reimbursement.

Hurricane season is already here but it is not too late to take preparative steps to help protect your business from the often unpredictable effects of storms. The only things business owners can control are the steps to help prevent and recover from damages.

2017 Atlantic Hurricane Season Outlook

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With the official opening of 2017 Atlantic hurricane season fast approaching, researchers appear cautiously optimistic the relatively quiet streak will continue.

Today, Colorado State University’s Tropical Meteorology Project released the extended range forecast of 2017 Atlantic seasonal hurricane activity, predicting slightly below-average activity in the Atlantic basin, with a forecast of 11 named storms, four hurricanes, and two major hurricanes.

Philip Klotzbach, CSU

The probability of at least one major (Category 3+) hurricane making landfall on the entire U.S. coastline is 42%, compared to an average of 52% over the past century. The probability of such a storm hitting the East Coast, including peninsula Florida is 24%, compared to an average of 31%. Thus, CSU noted, the estimated probability of a major hurricane making landfall in the U.S. this season is approximately 80% of the long-period average.

Hurricane activity may not be as critical a determinant for how insurers and property-owners will fare, however. Aon Benfield’s Global Catastrophe Recap reports have consistently noted the rising toll of economic and insured losses due to severe weather events including severe thunderstorms, hailstorms, and flash flooding. In Texas alone, for example, Aon Benfield reports the state incurred record thunderstorm-related losses for the year, with insurers citing costs exceeding $8.0 billion.

Other recent studies support this trend. In the Willis Re and Columbia University report Managing Severe Thunderstorm Risk, researchers found the risk to U.S. property from thunderstorms is just as high as from hurricanes. Their review of Verisk Analytics loss statistics for 2003 to 2015 found the average annual loss from severe convective storms including tornadoes and hailstorms was $11.23 billion, compared to $11.28 billion from hurricanes. Considering the past decade alone, severe convective storms posed the largest annual aggregated risk peril to the insurance industry.

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