Category Archives: catastrophes

Irene’s predecessors: Gloria and Hugo

Here’s a storm track of 1985 Hurricane Gloria, via Stormpulse:

Eerie, huh?

Strolling around the internet, I’ve seen a lot of Northeasterners pooh-poohing Irene’s threat, reasoning that Gloria hit about the same way. Gloria didn’t destroy much, so Irene and its lower windspeeds will be a popgun by contrast.

Here‘s Wikipedia on Gloria:

Gloria’s high winds caused significant damage across Long Island and southeastern New York. The area hit the worst was eastern Long Island, where high wind gusts blew thousands of trees into buildings and across roads. The broadcast tower of WBLI-FM toppled on Bald Hill in Farmingville. In addition, the winds ripped roofs off of many buildings, including hangars at the MacArthur Airport and the roof of the Islip Police Station.[12] Prolonged exposure to high winds and waves led to moderate beach erosion, washing away several piers and docks.[12] The storm surge, though relatively weak, destroyed 48 houses on the ocean side of the island. Gloria’s high winds left 683,000 people in New York without power, with some lacking electricity for over eleven days. . .

So Gloria was no picnic. But Irene is different from Gloria.

It is slower. Gloria got from the Outer Banks to Long Island in 10 hours. That means more rain to weaken the base that trees sit on (Gloria left about 4″).
It has a wider wind field, so more people are likely to feel hurricane force winds – like Essex County, NJ, where I live – maybe 40 miles from Irene’s eye. We’re going to have 40 mph winds for 12 hours – nine from the east and three from the west.
The storm I think about: Hurricane Hugo hitting Charlotte in 1989. Hugo was remarkable because it was powerful enough to bring tropical storm winds far inland, hitting trees that had never known that sort of force. Again, Wikipedia:

By the time it reached Charlotte, North Carolina, Hugo was still a fairly strong tropical storm with sustained winds of 54 mph (87 km/h) and gusts of 87 mph (140 km/h).[15] This was enough to topple trees across roads and houses, leaving many without power, closing schools for as long as two weeks, and spawning several tornadoes. Hugo reached the city of Charlotte only six hours after landfall, and the City of Conover around 7:00 am causing heavy rain and tearing down hundreds of trees. which is roughly 200 mi (320 km) inland.[16]

In all, 29 counties in North Carolina were declared federal disaster areas, with damages in that state alone estimated at $1 billion (1989 USD, $1.77 billion 2011 USD).[17]

New Jersey, for example, hasn’t been hit by anything like this since 1903. There are a lot of big old trees in New Jersey, even near the Shore in towns like Avon, Belmar and Spring Lake. Those mighty oaks were eight-foot saplings the last time they got so battered.

Lots of wind + different directions + soft ground + old trees = toppled trees. Lots and lots of them.

I worry that the field will be wide enough to damage tens of thousands of trees along the east coast, with those trees striking homes and power lines, causing so many outages that it could be a week, maybe more before power is restored.

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Irene: How bad?

No doubt now that Irene will pass just east of NYC, and first and foremost, I urge everyone to batten down the hatches.

This is an insurance blog, so it focuses on the economic threat from the storm. On which, NYT blogger Nate Silver posted this:

Apart from the potential loss of life in the most densely populated part of the country, history suggests that the economic damage could run into the tens of billions of dollars, depending on the severity of the storm and how close it comes to the city. Unlikely but theoretically plausible scenarios could have the damage entering the realm of the costliest natural disasters of all time, and perhaps being large enough to have a materially negative effect on the nation’s gross domestic product.

From his list, I’ll point out Hurricane Gloria ($900M) had a track eerily similar to Irene. This weather-geek thread points out Gloria hit Long Island with higher winds but had a smaller storm field and moved quickly. That = less area hit by big wind and less rain to soften up the ground.

According to the geeks, Gloria hit at low tide, minimizing storm surge. Irene seems likely to come into the NY area close to high tide.

The link in Nate’s quote takes you to Accuweather’s top five, which are measured by economic losses, not insurance losses:

  • 2011 Tohuku earthquake and tsunami: $235B
  • 1995 Kobe earthquake: $100B
  • 2005 Hurricane Katrina: $81B
  • 1994 Northridge earthquake: $42B
  • 2008 Sichuan earthquake: $29B

Insurance Information Institute lists the worst insurance natural catastrophes of all time through February 2011. I’ve added the March Japan quake/tsunami and the September 11 attacks, which of course were not natural catastrophes:

  • 2005 Hurricane Katrina: $62.2B.
  • 2001 World Trade Center terrorist attacks: $40B (in today’s dollars)
  • 2011 Tohuku earthquake/tsunami: $30B.
  • 2008 Hurricane Ike: $18B.
  • 1994 Hurricane Andrew: $17B.

As I write this (early Saturday), Irene has already hit the Bahamas. AIR’s early estimate is $1.1B there. Eqecat put its estimate at $300M to $600M. Fortunately, according to AIR, the most densely populated islands only got clipped by tropical storm winds.

Artemis, the cat bond guru site, had this to say on Wednesday:

Any landfall made by hurricane Irene on the U.S. east coast could result in billions of dollars of insured losses, potentially enough to increase the upward pressure on re/insurance rates. A worst case scenario of hurricane Irene coming ashore on a major population centre could result in the biggest U.S. insured loss so far this year.

Well that makes sense. This year’s Alabama tornadoes and Joplin tornadoes each posted around $5B in losses.

Late Friday, Kinetic Analysis put up a $3.5B insured loss estimate. I’m not familiar with the company. Its web site is here.

All of that seems to make a $3B insured loss the lower bound.

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Thoughts on Irene

Given the pace of events, I’m tweeting fairly regularly on Hurricane Irene. (See the column near the top left of this page, or check out http://twitter.com/#!/jimlynch9999.) All week I’ve tried to keep up-to-date on the path and intensity of this one.

I’m concerned. Right now, the heart of the tropical storm looks like it will pass just west of my home (Montclair, NJ).

But I’m not freaked because a storm is bearing down. I’ve been through hurricanes before (Andrew).

I’m concerned because, as of now (10 p.m. Thursday), NOAA forecasts a Cat 1 hit on New Jersey, a state that hasn’t been hit by a hurricane since, I think, 1903. There are a lot of old trees throughout the state. When hurricanes go far inland, those older trees can’t handle the winds. They fall and damage a lot of homes, especially in wealthy areas – rich people like big old trees around. If a lot of them topple onto power lines, there could be astounding power outages, triggering business interruption coverage.
I’d love to be wrong, but I sense a lot of damage and another multibillion-dollar event.

  • #Irene could be multibillion-dollar insurance event http://ow.ly/6dbmA || Similar to Floyd ($3.5B) and Jeanne ($4.15B).

But I think it could be much, much worse than either of those two.

Would love to be wrong.

 

 

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East Coast quake: Some facts

  • Epicenter near Charlottesville VA, 5.9 with a depth of “more than three miles.” That’s the worst quake since 1897 in Virginia, not as bad as the 6.3 in New Zealand in February and far short of the 9.0 quake in Japan. (Each increase of a single point is an increase of about 30-fold in shaking intensity.)
  • Initial reports – minimal damage at Charlottesville and Richmond. (These links have probably updated since I posted them, so the story may have changed. Lots of buildings shaking farther away, Boston to South Carolina.
  • Epicenter near the North Anna nuclear power plant, which shut down automatically. Backup generators switched on safely. (Remember it was the failure of backup generators that accelerated the Fukushima nuclear disaster.)
  • Virginia Tech has an important seismological research site here.
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2011 disaster frequency ties mark

Via the cat-bond loving Artemis and a few other sites: NOAA has updated its study of $1B+ disasters. (This is measured in 2011 economic losses, not insured losses, which are generally much less.)

The takeaway – 2011 has had nine billion-dollar babies. That ties the post-1980 record (2008), and there’s still 4½ months left, including the nastiest part of hurricane season. For the record:

  • Upper Midwest Flooding, Summer – $2.0B
  • Mississippi River flooding, Spring-Summer – $2.0B-$4.0B
  • Southern Plains/Southwest Drought, Heatwave, & Wildfires, Spring-Summer – $5.0B (so far)
  • Midwest/Southeast Tornadoes, May 22-27 – $7.0B
  • Southeast/Ohio Valley/Midwest Tornadoes, April 25-30 – $9.0B
  • Midwest/Southeast Tornadoes, April 14-16, 2011 – $2.0B
  • Southeast/Midwest Tornadoes, April 8-11, 2011 – $2.2B
  • Midwest/Southeast Tornadoes, April 4-5, 2011 $2.3B
  • Groundhog Day Blizzard, Jan 29-Feb 3, 2011 $2.0B

NOAA has also put together some nifty graphics, perhaps the most striking of which is the map above, showing how the Southeast gets hit most frequently. Many of these graphics are doubtless on the way to a PowerPoint presentation near you.

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Storm season starts spinning

As the stock market kind of, you know, melts, the Atlantic hurricane season appears to be heating up. Artemis channels Accuweather:

So far, a high over Bermuda and a high over the U.S. have formed – in football terms – a blocking wall that has suppressed potential hurricanes off Africa, steering them too far south or spinning them too far east. The easternmost one will move east next week (the 17th), and the westernmost one will move west. To carry on the football metaphor, that leaves a gap in protection over the Southeast U.S.

Meanwhile, the typical developments that make August nail-biting time are spinning out storms with their usual efficiency. Accuweather says three could emerge by Aug. 25. But there are pockets of wind shear that will likely inhibit the Cape Verde storms from turning outrageous for the next couple weeks.

 

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FL HO market: Undercapitalized?

Snagging some confidential documents from the Department of Insurance, Sarasota Herald-Tribune reporter Paige St. John questions the financial strength of several leading Florida homeowners insurers, including the state’s largest private HO writer – Universal P&C – and the Florida arms of Allstate and State Farm.

(Let’s add quickly: Allstate Florida and State Farm Florida are subsidiaries of much larger organizations. So the supposed threat to the Florida companies doesn’t extend to the parents.)

The problem: According to the documents, those companies don’t have the capital to withstand a 100-year hurricane. More than a half-dozen smaller companies have the same problem.

How does this happen? Looser regulation, according to the report. Until 2010, the state required them to show their ability to withstand a 100-year storm. But according to St. John, they gamed the process. Insurance Commissioner Kevin McCarthy removed that requirement, hoping premiums would fall.

And some insurers appear to have gamed the system. They used a tough model to set cat loads for their rates, resulting in higher rates. But they turned to a milder model for the report the state requires.

Other companies ignored the impact of demand surge, the very real inflation in construction costs that follow a storm.

Insurers defend themselves:

Almost all of the companies disputed the state-required test and said they could survive based on their own methods that predicted substantially smaller hurricane losses.

If the big one hits, St. John’s report concludes, hundreds of thousands of policyholders could lose their insurers, and the remaining insurers and taxpayers would end up with the bill.

Of course, the reporter herself appears to have played both ends of the cat modeling game. She excoriated insurers for depending on them to set rates, implying rates are too high. Now she criticizes insurers for failing to rely on them enough, implying insurers’ capital is too low.

Rather than wonder what the reporter really believes, I’ll just say that all insurers have an important interest in the capital adequacy of every insurer.

The story is here, and details on how all the state’s insurers fare on the state’s scenario test are here.

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Brokers’ halftime reports

In a sentence: The market has done just about everything necessary to turn, except turn.

A lot about market uncertainty in these reports, which always turns me off. What, after all, is certain? Beyond that, it’s clear that everyone believes a big blow will drive rates up. But there’s not a lot of confidence about what will happen if hurricane season is calm.

Details and links below.

Willis

Willis tells us that any turn in the market “is unlikely to follow historic patterns.” But in the face of 16 months with $86B in insured cat losses ($46B to reinsurers), the broker’s data indicate that for reinsurers a hard market is basically here:

  • Cat rates higher by double digits.
  • Per risk rates generally 5% to 10% higher.
  • Casualty rates flat.
  • Specialty (engineering, marine, accident, et al.) changes vary by line.
  • U.S. workers comp rates stable.

Willis has some nifty charts showing rate levels over long periods, like this one for U.S. catastrophe rates:

Holborn

Reinsurers have had “three Katrinas” since 2009, constraining capital on the order of $60B (Japan and other cats dating back to the Chilean earthquake; model changes requiring more capital to protect against U.S. hurricane). Even so, rates appear flat at midyear in catastrophe, per risk, clash and casualty markets. Future rate changes will depend on how the U.S. wind season plays out.

Holborn notes that 2010 and 2011 large losses have hit reinsurers harder than the cat heavy years of 2004 and 2005 (though, I’d add, not as big as 2001):

Holborn reports generally get posted here, but this one doesn’t appear to be up yet. Here’s a copy.

Guy Carpenter

Carpenter spouts the uncertainty line.

  • Moderate decline in capital slowing share repurchases.
  • Firmer rates on line for property cat at 4/1, 6/1 and 7/1

Losses from recent events are not fully developed and there is not a consensus position on the integration of RMS v11.

GC’s most interesting stuff comes in the cat bond/ILW arena. Channeling GC’s report, Artemis points out that cat bond issuance has dried up in second quarter (after a record Q1). There’s plenty of capital to be had, but not much risk transferring out. And what remains is heavily driven by U.S. wind.

Haven’t seen anything from Aon yet. Probably out today.

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Tornado season: How bad?

I was hasty in proclaiming this year’s tornado season the worst ever, picking up a chart from NOAA that showed more tornadoes reported at this point than in any year prior.

Claire Wilkinson over at Terms + Conditions looks at the tornado stats in detail:

But before we jump to conclusions about record-breaking numbers, it’s important to read the fine print.

First, these figures from NOAA’s Storm Prediction Center are a preliminary count of eyewitness reports for tornado events not a count of actual tornadoes.

SPC also cautions that comparisons between preliminary counts and actual counts from prior years should be avoided.

An article by the Dallas Weather Examiner points out that if all the 871 tornado reports during April 2011 verify for separate tornadoes, then this would eclipse the current monthly record of 542 tornadoes from May 2003.

But it goes on to suggest that because many of these reports are duplicates, the verified tornado total for April 2011 will probably come in below 542. This would leave May 2003 with the highest tornado count for any month.

In my (lame) defense, I picked up the screen grab from Eqecat to emphasize the main story, which was Eqecat’s estimate that last week’s tornadoes caused $2B to $5B in losses. But I should have gone back to verify.

Sorry.

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Eqecat: Tornado-season tab tops $2B already

$2B to $5B is Eqecat’s estimate.

So far, it’s the busiest tornado season ever, as this NOAA chart shows:

So far, so bad

It’s a bit tough to read, but the chart shows the cumulative number of tornadoes in a year. The black, incomplete line shows this year’s activity. The fact that it is higher at end-April than all the other lines means there have been more tornadoes in the U.S. this year (835 through April 28) than in any previous year at this juncture. (Previous record: 556.)

(Incidentally, the words inflation-adjusted in the chart title refer to NOAA’s adjustment for the fact that better reporting nowadays means more tornadoes are reported. NOAA in essence is making the chart an apples-to-apples comparison.)

In other news, Eqecat points out the rain those storms dumped is making its way to the nation’s rivers. The Ohio River and the Mississippi south of Cairo, Ill., are well above flood stage, with more to come.

And wildfires in Texas have probably created $100 million in insured losses.

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