Category Archives: Tornadoes

Auto Insurance, Business Insurance, Catastrophes, Disaster Preparedness, Disaster Resilience, ESG, Health & Safety, Homeowners Insurance, Insurers and the Economy, Market Conditions, Risk Management, Thunderstorms, Tornadoes, Wildfires, Winter Storms

Report: Policyholders
See Climate as a
‘Primary Concern’

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By Max Dorfman, Research Writer, Triple-I (06/08/2022)

Nearly three-quarters of property and casualty policyholders consider climate change a “primary concern,” and more than 80 percent of individual and small-commercial clients say they’ve taken at least one key sustainability action in the past year, according to a report by Capgemini, a technology services and consulting company, and EFMA, a global nonprofit established by banks and insurers.

Still, the report found not enough action is being taken to combat these issues, with a mere 8 percent of insurers surveyed considered “resilience champions,” which the report defined as possessing “strong governance, advanced data analysis capabilities, a strong focus on risk prevention, and promote resilience through their underwriting and investment strategies.”

The report emphasizes the economic losses associated with climate, which it says have grown by 250 percent in the last 30 years. With this in mind, 73 percent of policyholders said they consider climate change one of their primary concerns, compared with 40 percent of insurers.

The report recommended three policies that could assist in creating climate resiliency among insurers:

  • Making climate resilience part of corporate sustainability, with C-suite executives assigned clear roles for accountability;
  • Closing the gap between long-term and short-term goals across a company’s value chain; and
  • Redesigning technology strategies with product innovation, customer experience, and corporate citizenship, utilizing advancements like machine learning and quantum computing

“The impact of climate change is forcing insurers to step up and play a greater role in mitigating risks,” said Seth Rachlin, global insurance industry leader for Capgemini. “Insurers who prioritize focus on sustainability will be making smart long-term business decisions that will positively impact their future relevance and growth. The key is to match innovative risk transfers with risk prevention and assign accountability within an executive team to ensure goals are top of mind.”

A global problem

Recent floods in South Africa, scorching heat in India and Pakistan, and increasingly dangerous hurricanes in the United States all exemplify the dangers of changing climate patterns. As Efma CEO John Berry said, “While most insurers acknowledge climate change’s impact, there is more to be done in terms of demonstrative actions to develop climate resiliency strategies. As customers continue to pay closer attention to the impact of climate change on their lives, insurers need to highlight their own commitment by evolving their offerings to both recognize the fundamental role sustainability plays in our industry and to stay competitive in an ever-changing market.”

Data is key

The report says embedding climate strategies into their operating and business models is essential for “future-focused insurers,” but it adds that that requires “fundamental changes, such as revising data strategy, focusing on risk prevention, and moving beyond exclusions in underwriting and investments.”

The report finds that only 35 percent of insurers have adopted advanced data analysis tools, such as machine-learning-based pricing and risk models, which it called “critical to unlocking new data potential and enabling more accurate risk assessments.”

Catastrophes, Disaster Preparedness, Disaster Resilience, Earthquakes, ESG, Hurricanes, Insurers and the Economy, Regulation, Risk Management, Tornadoes, Wildfires, Winter Storms

As Nat Cat Losses Mount,
A Resilience Mindset Matters More Than Ever

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Insurance is essential for individuals, businesses, and communities to recover quickly from natural  catastrophes – but perils have evolved to a point at which risk transfer, though necessary, isn’t enough to ensure resilience.

Triple-I CEO Sean Kevelighan said during a that better insured communities recover more quickly but “the long-term resilience of both the communities impacted by natural catastrophes and of the industry itself depend on preparedness and improved risk mitigation.”  He was one of three panelists participating in the webinar.

“Something’s Got to Give”

Insured U.S. natural catastrophe losses totaled $67 billion in 2020 after an Atlantic hurricane season which included 30 named storms, record-setting wildfires in California, Colorado, and the Pacific Northwest, and a severe derecho in Iowa. This year’s hurricane season looks to be more severe; the Bootleg wildfire in Oregon – so large and intense it has begun to create its own weather and is affecting air quality as far east as New York City – isn’t  expected to be fully contained until late November; and these disasters are taking place on the heels of devastating winter storms in the first quarter.

As Kevelighan put it in his panel remarks, pointing to a 700 percent increase in insurer loss costs since the 1980s, “Something’s got to give.”

“As the country’s financial first responders,” he said, “insurers are not just responsible for providing relief to the communities affected by natural disasters, but also planning for potential catastrophes to come.”  

One of the ways insurers do this, he said, is by building the industry’s cumulative policyholders’ surplus—the amount of money remaining after insurers’ collective liabilities are subtracted from their assets. At year-end 2020, the U.S. policyholders’ surplus stood at a record-high $914.3 billion.

Mitigate and educate

The role of the insurance industry has grown beyond merely taking on risks to educating the public, regulators, and corporate decision makers on the changing nature of risk and driving a resilience mindset characterized by a focus on pre-emptive mitigation and rapid recovery. Triple-I and a host of other insurance industry organizations have played a key role in promoting public-private partnerships and using advanced data and analytics to understand and address hazards in advance.

For example, Triple-I’s online Resilience Accelerator provides access to data and risk maps that empowers the public to assess and prepare for risks specific to their own communities.

This webinar, co-presented by The Institutes’ Griffith Foundation and the Insurance Regulator Education Foundation, included panelists Hanna Grant, Head of the Secretariat, Access to Insurance Initiative; and Dr. Abhishek Varma, Associate Professor, Finance, Insurance and Law, Illinois State University. It was moderated by James Jones, Executive Director, Katie School of Insurance and Financial Services, Illinois State University.

Webinar highlights:

Catastrophes, Disaster Preparedness, Disaster Resilience, Earthquakes, Hurricanes, Insurance Fraud, Tornadoes, Wildfires

Unethical Contractors Emerge After Disasters; Know How to Avoid Them

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Natural disasters create opportunities for unethical contractors, and consumers need to be on the alert.

Post-disaster repair scams typically start when a contractor makes an unsolicited visit to a homeowner and pressures the homeowner to pay the contractor their insurance claim money – then disappear without doing the work.

Triple-I is teaming up with the National Insurance Crime Bureau (NICB) during the NICB’s Contractor Fraud Awareness Week (July 12-16) to educate the public about such frauds and how to avoid them.

Before hiring any contractor, consumers affected by a natural disaster should call their insurer. There’s no need to rush into an agreement. Homeowners should inspect all work and make sure they are satisfied before paying. Most contractors will require a reasonable down payment, but no payments should be made until a written contract is in place.

The NICB offers these tips to homeowners before hiring a contractor:

  • Be wary of anyone knocking on your door offering unsolicited repairs to your home. 
  • Be suspicious of any contractor who rushes you or says the government endorses them.
  • Shop around for a contractor by getting recommendations from people you trust.
  • Get three written estimates for the work and compare bids.
  • Check a contractor’s credentials with the Better Business Bureau.
  • Always ask for a written contract that clearly states everything the contractor will do.
  • Never sign a contract with blank spaces because it could be altered afterward.
  • Never pay for work up front and avoid paying with cash; use either a check or credit card.

The NICB Post-Disaster Contractor Search Checklist explains the contractor hiring process step by step.  Anyone with information concerning insurance fraud or vehicle theft can report it anonymously by calling toll-free 800-TEL-NICB (800-835-6422) or submitting a form to the NICB.

“Acting as communities’ financial first responders, insurers rebuild damaged homes, cars, and lives after a natural disaster,” said Triple-I CEO Sean Kevelighan.  “The Insurance Information Institute is proud to join forces with the NICB to educate consumers and communities about how to best prepare and recover economically.”

“Victims of disasters are under tremendous stress as they are often pulled from their homes, fight heavy traffic attempting to get to safety, all while leaving their home and belongings behind,” said NICB President and CEO David Glawe. “When they go home, they are exhausted and strained, a time when they are most susceptible to these fraudulent schemes.”

RELATED LINKS:

Article: Insurance Fraud

Facts & Statistics: Insurance Fraud

Catastrophes, Disaster Resilience, Flood Insurance, Floods, Hurricanes, Tornadoes, Winter Storms

Extreme Weather’s Seasonal Severity Impacts Rates, Regardless of Inflation, Price Gouging

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Losses from the winter storm that swept through the southern United States earlier this year continue to loom large among the concerns of property and casualty insurers, even as the nation contends with wildfires and anticipates yet another above-average hurricane season.

“On its own, Uri would not necessarily impact premium rates,” says Dr. Michel Léonard, CBE, Triple-I vice president and senior economist. “What matters is the overall severity of extreme weather events during a calendar year or a specific peril season.”

Dr. Léonard reports that current expectations among weather experts of higher-than-average hurricane and wildfire seasons – in addition to Uri – will likely contribute to increases in property insurance rates in 2021, “before and regardless of inflation.”

“Traditionally, actuarial models keep natural catastrophe losses and inflation separate and combine them in the last stage of rate estimates,” Léonard says. 

Three 2021 trends, he says, add up to put upward significant pressure on insurance rates for 2022:

  • Combined 2021 natural catastrophe losses from winter storms, hurricanes, and wildfires expected to be above annual averages;
  • Overall inflation in the U.S. currently forecast to be between 4% and 6% for 2021, the highest in a decade; and
  • Industry-specific inflation above the national average for construction materials and labor due to COVID-19 supply-chain disruptions.

“There are a few situations in which extreme weather events directly contribute to replacement cost increases, which, in turn, impact rates,” Léonard says. “But ‘price gouging’ – such as happened after Uri – shouldn’t be confused with inflation. It’s temporary, while inflation almost always endures.”

Catastrophes, Disaster Resilience, Tornadoes

Ten years after deadly tornado, Joplin Missouri is disaster-ready

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May 22 marks the ten-year anniversary of the Joplin, Missouri, tornado – the deadliest single tornado event in U.S. history. In these videos, Triple-I’s Scott Holeman shows how the people of Joplin have recovered and become more resilient.

The EF-5 tornado destroyed thousands of homes and businesses and was the largest insurance event in Missouri history, with insured losses totaling roughly $9 billion (in 2021 dollars).

Survivors of the 2011 tornado say many lessons were learned after the devastating storm. Local insurance experts say the disaster taught the community about the importance of renters insurance and keeping homeowners policies updated. 

Today, many Joplin residents prepare a “go-kit” whenever there’s a storm threat.

Numerous public facilities, businesses and residences have added enhanced safety modifications. The high school and hospital are prominent examples.

Disaster Preparedness, Disaster Resilience, Floods, Hurricanes, Thunderstorms, Tornadoes, Wildfires, Winter Storms

White House, FEMA Resilience Officials
Speak at Triple-I Event

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Caitlin Durkovich, special assistant to President Biden and White House National Security Council senior director of resilience and response, discussed the administration’s climate and resilience priorities at Triple-I’s National Town Hall (highlights video below. Click here to view full event).

She and Paul Huang, acting associate administrator of resilience for the Federal Emergency Management Administration (FEMA), met virtually with Triple-I CEO Sean Kevelighan and Michel Léonard, Triple-I vice president and senior economist.

“Resilience is a very important theme of this administration and of the priorities we have,” Durkovich said, elaborating that this includes preparation for and response to both natural and man-made events. The objective is to learn from every incident “so we don’t just bounce back but bounce forward.”

Referring to the administration’s infrastructure and clean-energy goals, she said, “We’re anticipating what the  world is going to look like 20 to 30 years from now, given the life span of our built infrastructure.”

Durkovich noted that there are several longstanding hazard-mitigation and hazard-response programs spread across multiple agencies.

“I think we have the opportunity to bring at least the federal community together to look at some of those programs and think about how we can modernize them, just like we’re modernizing infrastructure,” she said.

This will help communities “build back better” after an event.

But it’s going to take more than federal government to bring this about. Communities will have to be very involved, she said, adding, “It’s not just state and local planners, but it’s infrastructure owners and operators, it’s the finance side of the house, who are needed to work through some of these hard challenges before, so after an emergency, when money becomes available, you’re ready to make some significant changes.”

And as we invest in electrified transportation infrastructure, she said, “we have to make sure that infrastructure is resilient to power outages, to storms, and when we’re in the middle of a mass evacuation it can accommodate hundreds of thousands of people.”

Despite having to think about everything that could go wrong (what she described as “healthy paranoia”), Durkovich was upbeat: “It’s amazing to be having these conversations about designing resilience in at the beginning, instead of bolting it on at the end.”

FEMA’s Paul Huang echoed Durkovich’s enthusiasm for a “whole of government” and “whole of community” approach to resilience.

“We’re going to have to rethink how we do things,” he said.  “We have programs that have always been around. They’re good programs, but it’s not enough.  We have to think bigger and more creatively.”

Huang talked about a new FEMA program, Building Resilient Infrastructure and Communities (BRIC), that support states, local communities, tribes and territories in developing hazard-mitigation projects, reducing the risks they face from natural disasters.  “We’re hoping to see new ideas from industry, working with local and state government, to say, ‘This is something we can try together in partnership to get a bigger bang for our buck.’ “

Disaster Preparedness, Disaster Resilience, Floods, Thunderstorms, Tornadoes, Winter Storms

Polar Vortex,
Convective Storms
Keep Driving Losses

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Insured losses from March storms in the United States are likely to surpass $1 billion, Aon said in its monthly Global Catastrophe Recap.

Aon said multiple outbreaks – featuring tornadoes, hail, snow, and flooding – were to blame.  The most notable included severe weather across the Central and Southern United States, with 122 tornadoes touching down during the month – the most since 2017. Alabama, Mississippi, Texas, Georgia, and Tennessee experienced the most damage.

This followed record-setting winter weather-related insured losses in February, following a prolonged Polar Vortex event, in which Arkansas, Kentucky, Tennessee, and Texas were among the hardest-hit states.

“The Polar Vortex generated record-breaking cold temperatures which extended as far south as the U.S./Mexico border,” Aon said in its February report. “Concurrently, a series of low-pressure systems produced rounds of hazardous snow, sleet, freezing rain, ice, and severe thunderstorms with impacts spanning from Washington state to the Mid-Atlantic.”

Texas was hard hit by the winter weather, which left dozens dead, millions without power, and nearly 15 million with water issues and could wind up being the costliest disaster in state history. Disaster-modeling firm AIR Worldwide says insured losses “appear likely to exceed $10 billion.”

The Electric Reliability Council of Texas (ERCOT) has been widely criticized for failing to require power facilities to be winterized after the last major storm that caused outages in 2011, thus contributing to damage incurred during the more recent one. Last week, the Cincinnati Insurance Company, headquartered in Ohio, filed suit asking a federal court for a declaratory judgment that would allow the insurer to decline paying damages in bodily injury or property damage lawsuits where ERCOT is found to be liable.

If the federal court doesn’t grant the declaratory judgment, Cincinnati Insurance would likely have to cover ERCOT under its current policy contract.

In February and into March, multiple rounds of heavy rainfall and severe weather generated flooding across parts of the Ohio and Tennessee Valleys. Parts of Kentucky, Tennessee, and West Virginia were most affected.

“Impacts were compounded by localized severe weather, including large hail, straight-line winds, and isolated tornadoes,” Aon reported. “Total economic losses were estimated to approach USD 100 million.”

A large portion of the residential flood damage was expected to be uninsured due to low National Flood Insurance Program (NFIP) coverage.

Severe weather activity in the South continues in April. A cluster of storms swept across the region over the weekend, leaving one person dead in Louisiana, toppling trees and power lines in Mississippi, dropping baseball-sized hail in Alabama, and leveling buildings in the Florida Panhandle.

Catastrophes, Disaster Preparedness, Disaster Resilience, Tornadoes

Some Experts Suggest Retiring the Name “Tornado Alley”

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(Photo by Robert Laberge/Getty Images).

What’s in a name? If you live in “Tornado Alley,” there might be a lot – or less than you might imagine.

The designation refers to a stretch of geography running from Texas and Oklahoma through Nebraska and Kansas (think Dorothy and Toto, their house wrenched from the parched, flat earth and spinning toward Oz). It first came into use almost 70 years ago, when two atmospheric scientists used it as the title for a research project on tornadoes.

But, as the Washington Post recently reported, some experts believe the name is misleading and should be retired.

“To be honest, I hate the term,” said Stephen Strader, an atmospheric scientist at Villanova University specializing in severe weather risk mitigation. “What people need to understand is that if you live east of the continental divide, tornadoes can affect you.”

Research has shown tornadoes are just as common in the Deep South as they are on the Plains, and there is no real drop in tornadoes as one exits Tornado Alley to the east.

“Tornadoes on the Plains are often elegant and foreboding,” the Post says, “some reliably appearing as high-contrast funnels that pose over vacant farmland for hordes of storm chasers and photographers. The Plains are like a giant meteorological classroom, an open laboratory; its students flock to it every year.”

Which explains why tornadoes we see on TV have that “classic” funnel look – and what we are shown most often comes to be thought of as most “typical.”

In the Deep South, most tornadoes are, as the Post puts it, “rain-wrapped and shrouded in low clouds, impossible to see.” More than a third of all tornadoes in Alabama and Mississippi occur at night, making them twice as likely to be deadly.

But, because they don’t match the popular perception of what a tornado is like and are hard to capture, they seldom appear on TV.

Why does it matter?

Because how we name things influences how we think about them, and how we think about them influences policymaking and individual behavior.

As we reported last year, tornado reports are on the rise – but is that because of changes in weather and climate? Or improved reporting related to technology and the growing popularity of “storm chasing”? Damage from tornadoes and other types of natural disasters is becoming more costly – is that because storms are becoming more frequent and severe? Or because more people are moving into disaster-prone areas?

If you’re not located in Tornado Alley, does it make sense to invest in mitigating tornado-related risks? Probably as much as it does to have flood insurance, even if you’re not in a FEMA-designated flood zone, or anticipate and prepare for winter storms in Texas.

For more information:

Severe Convective Storms: Evolving risks call for innovation to reduce costs, drive resilience