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Flood risk experts hope that the damage inflicted by Hurricane Florence will focus attention on the increasing frequency and severity of precipitation events and away from traditional storm metrics such as wind speed, leading to a more comprehensive examination of the multitude of factors contributing to potential losses.
“One of the challenges that we have identified is this tendency to identify individual events as fairly extreme and, as such, also attribute a rarity to them that may not necessarily be the right attribution,” said Michael Szoenyi, flood resilience program lead for Zurich Insurance Group Ltd. in Zurich. “People think events are less likely to occur then they actually are, and that has a whole range of implications in terms of what actions do you take. That’s something we’ve been trying to break through.”
For example, a common term used in descriptions of flooding events is a one in 100-year flood, referring to a flood event that has a 1% probability of occurring in a given year.
“Floods and storms have no memory,” said Mr. Szoenyi, whose company published a report about an October 2015 weather event in South Carolina in which the state experienced days of torrential rains and severe flooding and total losses estimated at $12 billion — comparable to the economic impact of Hurricane Hugo in 1989. “They can occur last year and occur again this year. It’s all just averages and statistics.”
Hurricane Florence, like Harvey, proved the fallacy of depending on wind speed as the sole factor in projecting or determining damage. Florence was initially projected to make landfall as a Category 4 storm, but was later downgraded to Category 1, made landfall on Sept. 14 and stalled across North and South Carolina. The storm and its remnants delivered record-breaking rainfall, dropping 36 inches on North Carolina and nearly 24 inches in South Carolina.
“The inland vs. coastal story is one that is extremely important,” said Forbes Tompkins, officer with the flood-prepared communities initiative of the Pew Charitable Trusts in Washington. “A lot of folks leading up to the storm tended to focus on what category strength the storm was. But that really doesn’t tell the full story of what impacts and threats are posed by these types of events. People get caught up on the wind speeds, but the area that is impacted by some of these strongest winds is just a fraction of the area that ends up being impacted by storm surge and rainfall. It’s really in some ways a poor metric to communicate and measure the risk that’s posed from these storms. Coastal counties tend to be the ones with higher coverage of flood insurance, but if you look at some of the most inland counties that were impacted, it ranges from less than 1% were covered by (the National Flood Insurance Program) to just over 3%. Often in the inland counties, there’s underappreciation for the risk that’s posed to them.”
Insured losses resulting from Hurricane Florence’s winds and storm surge will range from $1.7 billion to $4.6 billion, not including the impact of the flooding caused by the storm’s unprecedented precipitation, Boston-based catastrophe modelling firm AIR Worldwide said last week. Florence’s slow movement of 3 mph to 6 mph ensured that its principal impact will be from the excessive precipitation deposited over an extremely wide area, according to the firm.
Newark, California-based catastrophe modeler Risk Management Solutions Inc. pegged insured losses for Hurricane Florence at between $2.8 billion and $5 billion, representing losses associated with wind, storm surge and inland flood damage across North Carolina, South Carolina and Virginia, including an estimated $800 million to $1.2 billion in losses to the National Flood Insurance Program.
“It is important to remember that the Saffir-Simpson Hurricane Wind Scale is based only on wind speed and does not advise on expected levels of storm surge or inland flooding,” James Cosgrove, London-based senior analyst for event response at RMS, said via email. “In the case of Florence, the reduction in its forward speed and intensity as it approached the Carolinas meant that the threat from wind was reduced. What became clear several days in advance of landfall was that flooding, from a combination of storm surge and inland flooding, was going to be significant driver of damage and loss from this event. This factor is not accounted for in the SSHWS.”
“It’s almost like a new system needs to be developed that really takes all of those critical elements — storm surge and rain production and wind production – and combines those into some type of system that accounts for all those different elements,” said Clark Schweers, BDO USA LLP’s forensic insurance and recovery practice leader in Washington. “There is nothing more destructive than water, and water is unstoppable in many respects.”
“The speed of the storm is a critical factor in understanding how much damage can be done,” he added, noting the stalling that occurred with both hurricanes Harvey and Florence.
“Florence was a massive, intense storm,” said John Dickson, president of Aon Edge in Kalispell, Montana, which sells flood insurance policies. “It decreased in intensity as it approached the coast, and I think people assumed that the storm wasn’t a big deal (because) it was a lower category. But this storm had all the water effects of a massive, major hurricane. Florence was a devastating event. It reinforces that we’ve got to do a better job of getting more people aware of flood insurance and getting more people protected against these events.”
“It boils down to how many times do we have to watch the same heart-wrenching movie with the same tear-jerking ending and not do anything about it,” he added.
Losses from Hurricane Florence should be “manageable” for the property/casualty insurance sector, according to an analysis released Thursday by S&P Global Ratings.