The Challenge of Communicating Flood
Risk2006 National Flood Conference
National Flood Insurance Program
May 9, 2006
Robert P. Hartwig, Ph.D., CPCU, Senior Vice President & Chief EconomistInsurance Information Institute 110 William Street New York, NY 10038
Tel: (212) 346-5520 Fax: (212) 732-1916 [email protected] www.iii.org
Presentation Outline
• The Media & Flood Insurance• Flood Facts Review• The Flood Insurance Purchase Decision• Summary of I.I.I. Actions to Promote Flood Awareness,
Preparedness & Flood InsuranceQUESTIONS• What Should Have Been Done to Communicate Flood Risk
Pre-Katrina?• What Should be Done to Communicate Risk & Reduce Loss
Going Forward?
• APPENDIX 1: Key Flood Program Statistics• APPENDIX 2: Key Hurricane Statistics
The Media & Flood Insurance
Better Late than Never
Property Damage from Hurricane Katrina Flood & Storm Surge ($ Millions)*
LA Storm Surge Loss, $16,200 , 36.8%
New Orleans Flood Loss, $22,600 , 51.3%
FL Storm Surge Loss, $32 , 0.1%
AL Storm Surge Loss, $793 , 1.8%
MS Storm Surge Loss, $4,400 , 10.0%
*Value of property damage by flood and storm surge whether or not insured.Source: AIR Worldwide, September 29, 2005.
Hurricane Katrina caused $44 billion in flood and storm
surge damage, most of it uninsured, 88.1% of it in
Louisiana
Media Coverage of Flood Insurance, 2000-2006E*
State 2000 2001 2002 2003 2004 2005 2006E
LA 76 111 108 124 122 479 1,518
MS 20 20 26 55 45 349 804
FL 215 227 161 231 463 655 456
NY 64 38 34 36 65 146 171
US*1,96
11,88
2 1,919 2,177 2,994 4,647 5,772
US-All Print Media**
2,761
2,714 3,128 3,368 6,377
10,526 13,242
*Newspaper coverage as of May 8, 2006. 2006 is III estimate.**Includes newspapers, magazines, wire services, etc.Source: Insurance Information Institute analysis based on Nexis search.
1,96
1
1,88
2
1,91
9
2,17
7
2,99
4 4,64
7
5,77
2
2,76
1
2,71
4
3,12
8
3,36
8
6,37
7
10,5
26
13,242
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
2000 2001 2002 2003 2004 2005 2006E
US* US-All Print Media**
Media Coverage of Flood Insurancein the US Overall, 2000-2006E*
US newspaper coverage of flood insurance rose an
estimated 165% between 2003 and 2006 and rose 293%
across all print media
*Newspaper coverage as of May 8, 2006. 2006 is III estimate. **Includes newspapers, magazines, wire services, etc. Source: Insurance Information Institute analysis based on Nexis search.
76 111 108 124 122
479
1,518
20 20 26 55 45
349
804
0
200
400
600
800
1,000
1,200
1,400
1,600
2000 2001 2002 2003 2004 2005 2006E
LA MS
Media Coverage of Flood Insurancein LA & MS, 2000-2006E*
*Newspaper coverage as of May 8, 2006. 2006 is III estimate. Source: Insurance Information Institute analysis based on Nexis search.
Media coverage of flood insurance in Louisiana rose an
estimated 1,144% between 2003 and 2006 and 1,362% in
Mississippi. Coverage rose 165% for the US overall.
215 227
161
231
463
655
456
0
100
200
300
400
500
600
700
2000 2001 2002 2003 2004 2005 2006E
Media Coverage of Flood Insurancein Florida, 2000-2006E*
*Newspaper coverage as of May 8, 2006. 2006 is III estimate. Source: Insurance Information Institute analysis based on Nexis search.
Media coverage of flood insurance in Florida rose an
estimated 184% between 2003 and 2005 but may fall
by 30% in 2006
64
38 34 36
65
146
171
0
20
40
60
80
100
120
140
160
180
2000 2001 2002 2003 2004 2005 2006E
Media Coverage of Flood Insurancein New York State, 2000-2006E*
*Newspaper coverage as of May 8, 2006. 2006 is III estimate. Source: Insurance Information Institute analysis based on Nexis search.
Media coverage of flood insurance in New York State
rose an estimated 175% between 2003 and 2006
27% 29
%
44%
28% 32
%
48%
31%34
%
34%
49%
34%
25%
22%
17%
24%
19%
33%
32%
43%
33%
42%
18%
19%
25%
25%
21%
44%47
%
33% 35
%
0%
10%
20%
30%
40%
50%
60%
Los Angeles Bay Area Sacramento San Diego CentralValley
Flood Earthquake WildfireSlides Storms Tsunami
California Hazards: % People Stating Prepared/Very Prepared
Source: Insurance Information Network of California Survey, February 2006.
The Flood Insurance Purchase
& Retention Decision
Flood Insurance is a Tough Sell
$756
.7
$756
.7
$768
.5
$773
.4
$784
.7
$792
.3
$801
.9
$811
.1 $828
.5 $851
.5
$860
.6
$870
.2
4.58 4.59 4.60 4.60
4.65 4.664.68
4.73
4.784.80
4.834.85
$680
$700
$720
$740
$760
$780
$800
$820
$840
$860
$880
Mar-05
Apr-05
May-05
Jun-05
Jul-05
Aug-05
Sep-05
Oct-05
Nov-05
Dec-05
Jan-06
Feb-06
Ins
ura
nc
e in
Fo
rce
($
Bill
ion
s)
4.40
4.45
4.50
4.55
4.60
4.65
4.70
4.75
4.80
4.85
4.90
Po
licie
s in
Fo
rce
(M
illio
ns
)
Insurance in Force ($B)
Number of Policies
Flood Insurance in Force,March 2005-February 2006
Source: FEMA/NFIP web site accesses 5/8/06: http://www.fema.gov/business/nfip/statistics/stats.shtm.
NFIP policy count is up 6% Mar. 2005 – Feb. 2006. Exposure is up 15.0%
88.3
% 90.8
%
91.0
%
91.6
%
90.6
%
92.0
%
91.9
%
87.5
%
88.8
%
89.3
% 92.1
%
92.0
%
93.2
%
92.7
%
93.2
%
93.1
%
90.6
% 92.5
%
84.6
%
75%
80%
85%
90%
95%
100%
Aug-04
Sep-0
4
Oct-0
4
Nov-04
Dec-0
4
Jan-0
5
Feb-0
5
Mar
-05
Apr-05
May
-05
Jun-0
5
Jul-0
5
Aug-05
Sep-0
5
Oct-0
5
Nov-05
Dec-0
5
Jan-0
6
Feb-0
6
Flood Insurance Retention Rates,March 2005-February 2006
Flood insurance retention rates are a problem. Program lapse rate is too high.
Customer acquistion is expensive.
Source: FEMA/NFIP web site accesses 5/8/06: http://www.fema.gov/business/nfip/statistics/stats.shtm.
28%
61%
22%
60%
49%
1%1%3%
0.6% 0.4%0%
10%
20%
30%
40%
50%
60%
70%
Northeast South Midwest West Overall US
In SFHA*Out of SFHA
NFIP Flood PolicyPenetration Rates, by Region
*Special Flood Hazard Areas.Source: The National Flood Insurance Program’s Market Penetration Rate:Estimates and Policy Implications, RAND, 2006.
While nearly half of people
outside SFHAs purchase flood coverage, only
1% outside SFHAs do
Flood Insurance Penetration Rates:Top 25 Counties/Parishes in US*
81.5%80.0%
78.7%77.1%
74.1%69.6%
68.4%68.1%
66.7%65.9%65.5%
62.4%59.0%
56.2%51.6%
49.6%48.0%
46.3%44.4%
42.8%42.8%42.0%41.9%
40.1%
84.0%
0% 20% 40% 60% 80% 100%
JEFFERSON/LAWALTON/FL
BROWARD/FLCOLLIER/FL
LEE/FLGALVESTON/TX
GLYNN/GAST. BERNARD/LAMIAMI-DADE/FL
ORLEANS/LACARTERET/NC
ST. CHARLES/LAST. JOHNS/FL
CHARLOTTE/FLST. TAMMANY/LA
HORRY/SCINDIAN RIVER/FL
BAY/FLBRUNSWICK/NC
NASSAU/FLBERKELEY/SC
PINELLAS/FLBRAZORIA/TXCHATHAM/GA
TERREBONNE/LA
Highest flood insurance penetration rates are in
LA and FL, but most are underinsured
No counties in the Northeast
are represented in Top 25
*As of 12/31/05.Source: New Orleans Times-Picayune, 3/19/06, from NFIP and US Census Bureau data.
Flood Insurance Penetration Rates:Counties/Parishes Ranked 26-50*
39.7%39.2%39.1%38.7%
37.2%36.5%36.2%
34.2%33.0%
32.1%30.6%
28.3%27.6%
27.0%26.8%26.4%26.1%
25.4%25.3%25.2%
23.4%23.3%
22.1%21.7%
39.8%
0% 10% 20% 30% 40% 50%
BALDWIN/ALSARASOTA/FL
PALM BEACH/FLCHARLESTON/SC
MANATEE/FLMARTIN/FL
ATLANTIC/NJLAFOURCHE/LA
OKALOOSA/FLGEORGETOWN/SC
FLAGLER/FLMAUI/HI
LIVINGSTON/LABREVARD/FL
SUSSEX/DEVOLUSIA/FL
ST. LUCIE/FLJEFFERSON/TX
HAMPTON CITY/VAOCEAN/NJ
HARRIS/TXPASCO/FL
BOSSIER/LANEW HANOVER/NC
BRONX/NY
Mid-Atlantic/Northeast Counties are
underrepresented
People along the eastern
seaboard have not gotten the
message
*As of 12/31/05.Source: New Orleans Times-Picayune, 3/19/06, from NFIP and US Census Bureau data.
Flood Insurance Penetration Rates:Counties/Parishes Ranked 51-75*
20.9%20.1%
19.1%18.3%
17.8%17.7%17.5%
16.7%16.3%
15.8%15.6%15.4%
14.5%14.0%
13.3%12.9%
12.6%11.7%11.6%
11.3%10.2%
9.3%9.1%
8.5%
21.6%
0% 5% 10% 15% 20% 25%
CAMERON/TXFORT BEND/TX
SANTA ROSA/MSHARRISON/MSJACKSON/MS
NORFOLK CITY/VAHILLSBOROUGH/FL
LAFAYETTE/LAEAST BATON ROUGE/LA
VIRGINIA BEACHESCAMBIA/FLHONOLULU/HI
SACRAMENTO/CACALCASIEU/LA
MONTGOMERY/TXCITRUS/FL
MERCED/CACHESAPEAKE,
OSCEOLA/FLHUDSON/NJ
DUVAL/FLBARNSTABLE/MA
MARIN/CATULARE/CA
MONMOUTH/NJ
*As of 12/31/05.Source: New Orleans Times-Picayune, 3/19/06, from NFIP and US Census Bureau data.
MS coastal counties
rank abysmally
low
Barnstable is only county in all of New England among Top 75
16%
56%
66%
0%
10%
20%
30%
40%
50%
60%
70%
Under 500 501 - 5,000 More Than 5000
Proportion of Homes Buying Flood Insurance by No. of Homes in SFHA*
Communities with few SFHAs are the most likely to not
buy flood insurance
*Special Flood Hazard Areas.Source: The National Flood Insurance Program’s Market Penetration Rate:Estimates and Policy Implications, RAND, 2006.
Factors Influencing NFIP Flood Penetration Rates
• Price• Change in Price• Number of Homes in a Community’s Special Flood
Hazard Area (SFHA)Mandatory purchase requirements less vigorously enforced
in communities with fewer structures in SFHAsQuestions about enthusiasm in selling or knowledge of agents
regarding program
• Coastal Flooding PotentialPenetration rate much higher for coastal communities
subject to flooding versus those that are not (63% vs. 35%)
• Mandatory Purchase RequirementSource: The National Flood Insurance Program’s Market Penetration Rate:Estimates and Policy Implications, RAND, 2006.
Reasons Why People BuyFlood Insurance
Mortgage Lender Requirement, 27%
Not Near Water, But Don't Want to Take
Chances, 29%
Agent/Broker Recommendation,
20%
House Near Body of Water, 24%
Source: Poll of 700 conducted by Opinion Research Corporation by Chubb Group of Insurance Companies, summarized in March 2006 press release “Katrina Doesn’t Motivate Many Homeowners to Protect Their Investment.”
Risk aversion and compulsion are the two most important
direct factors influencing the
purchase decision. Educational
attainment & income are also factors.
Additional Factors Influencing NFIP Flood Penetration Rates
• Education/Income of Homeowner• Tendency to Decline Most Optional Coverages
Only 13% of CA homeowners buy earthquake insurance• Lack of Understanding of Actual Risk
Most people do not understand the meaning or implications of 1-in-100 year flood risk
Most people have never looked at a flood map• Coverage Limits (e.g., $250K cap)• Expectation of Post-Event Aid
Potentially a more important factor for future events• Litigation Suggesting that Flood is Covered Under
Standard Homeowners Insurance PoliciesMS Attorney General Hood, Attorney Richard Scruggs, etc.
Source: Insurance Information Institute
Percentage of California Homeowners with Earthquake
Insurance, 1994-2004*
32.9% 33.2%
19.5%17.4%
14.6% 13.3% 13.8%15.8%15.7%
16.8%
0%
5%
10%
15%
20%
25%
30%
35%
94 96 97 98 99 00 01 02 03 04*Includes CEA policies beginning in 1996.Source: California Department of Insurance; Insurance Information Institute.
Selling any type of voluntary catastrophe insurance is tough. The vast majority of
California homeowners forego earthquake coverage & play Russian
Roulette with their most valuable asset.
I.I.I. Actions to Promote Flood
Risk Awareness & Preparedness
Refer people/media to NFIP resources. Echo message that everyone is at risk.
I.I.I. Initiatives onFlood Insurance
• Thousands of Media InterviewsStressing importance of purchasing floodProviding media with key information
• Video News Release (VNR) on Flood InsurancePre-packaged segment for new broadcasts (needs update)
• VNR on Hurricane Preparedness• VNR on Disaster Preparedness• Presentations to Agents, Insurer Groups & Others
Potentially a more important factor for future eventsTestimony before regulatory/legislative bodies
• Home Inventory Software (FREE!!)Download at www.knowyourstuff.org
• Northeast Insurance Summit: July 19, 2006 in NYC
Source: Insurance Information Institute
What Should & Could be Done?
Lessons from the Past
What Should Have Been Done Pre-Katrina: Carrots or Sticks?
• Levees should have been strengthened or land use policies revised decades ago
• Offer incentives to mitigate many years agoLevees and homes/businessesWould have been cost effective
• Update of flood maps• Actuarially sound rates—Send Market Signal on Risk
Stop subsidizing coastal development; burdening taxpayers• Reduce lapse rates: Keep the customers you have!• Experience: Stepped-up marketing is of limited value• Expand Mandatory Purchase Requirement???• Require written affirmation if flood is declined with waiver
of rights to federal and state aid???
What Can be Done?Pick the Low Hanging Fruit First
• Target communities with small numbers of structures in
Special Flood Hazard Areas (SFHAs)
• Target inland communities vs. coastal: More Potential
• Increase coverage carried by coastal dwellers
• Increase compliance with mandatory purchase
requirement
• Expand Mandatory Purchase Requirement???Expand mandate beyond 1-in-100 year flood plain??
Make coverage mandatory irrespective of mortgage status??
Source: The National Flood Insurance Program’s Market Penetration Rate:Estimates and Policy Implications, RAND, 2006; Insurance Information Institute.
APPENDIX 1 Flood Facts
Key Flood Program Statistics
NFIP: Policies in Force and Total Coverage (Exposure)
2.5 2.62.8
3.03.5
3.74.1 4.2 4.3 4.4 4.5 4.6
4.8 4.94.5 4.7
0.0
1.0
2.0
3.0
4.0
5.0
6.0
91 92 93 94 95 96 97 98 99 00 01 02 03 04 05* Feb-06
Pol
icie
s in
For
ce (
Mil
lion
s)
$200
$300
$400
$500
$600
$700
$800
$900
$1,000
Total C
overage ($ Billion
s)
Policies in Force Total Coverage (Exposure)
*As of December 2005.Sources: FEMA, National Flood Insurance Program (NFIP)
Nearly 5 million property owners per year buy
NFIP policies
The NFIP insured property with a total value of $870.2 billion as of Feb. 2006
NFIP: Total Policies in Force by Calendar Year, 1978-Feb. 2006
1.45 1.
84 2.10
1.92
1.90
1.98
1.93
2.02 2.12
2.12
2.15 2.29 2.48
2.53
2.62 2.83
3.48 3.
69 4.10 4.24
4.33
4.37
4.46
4.52
4.57
4.67 4.80
4.85
3.04
0
1
2
3
4
5
6
78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05*
Feb
-06
*As of December 2005Source: FEMA, National Flood Insurance Program (NFIP)
Millions
No.
of
Pol
icie
s (M
illi
ons)
Nearly 5 million property owners per
year buy NFIP policies
NFIP: Total Premium by Calendar Year 1978-Feb. 2006
$0.1
1$0
.14
$0.1
6$0
.26
$0.3
5$0
.38
$0.4
2$0
.45
$0.5
2$0
.57
$0.5
9$0
.63
$0.6
7$0
.74
$0.8
0$0
.89 $1
.14
$1.2
8 $1.5
1$1
.67
$1.7
2$1
.72
$1.7
4$1
.80
$1.9
0$2
.05
$2.2
3
$1.0
0$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04
Feb
-06
Source: FEMA, National Flood Insurance Program (NFIP)
$ Billions
The NFIP now collects more than $2.2 billion annually in premiums
NFIP: Total Coverage (Exposure) by Calendar Year 1978-Feb. 2006
$50.
5$7
4.4
$99.
3$1
02.1
$107
.3$1
17.8
$124
.4$1
39.9
$155
.7$1
65.1
$175
.8$2
65.2
$213
.6$2
23.1
$236
.8$2
67.9
$349
.1$4
00.7
$462
.6$4
97.6
$534
.1$5
67.6
$611
.9$6
53.8
$691
.8$7
64.5
$851
.5$8
70.2
$295
.9$0
$100$200$300$400$500$600$700$800$900
$1,000
78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05*
Feb
-06
*As of December 2005.Source: FEMA, National Flood Insurance Program (NFIP)
$ Billions
The NFIP insured property with a total value of $870.2
billion as of Feb. 2006
NFIP: Policies in Force By Coverage Type (As of July 31, 2005)
Building Coverage Only,
39.7%
Contents Coverage Only,
1.5%
Both Bldg. & Cont. Cvg,
58.7%
Source: FEMA, National Flood Insurance Program (NFIP)
Coverage Type Policies in Force
Building Coverage Only 1,845,481
Contents Coverage Only 72,008
Both Bldg & Cont Cvg 2,729,267
All Policies 4,646,756
NFIP: Policies in Force By Occupancy Type (As of July 31, 2005)
2 to 4 Family Unit3.4%
Other Residential
3.0%
Non-Residential
4.6%
Single Family Home68.5%
Condos 20.5%
Source: FEMA, National Flood Insurance Program (NFIP)
Occupancy Type Policies in Force
Single Family Home 3,184,010
2 to 4 Family Unit 158,124
Condominiums 951,240
Other Residential 138,583
Non-Residential 214,799
Unknown Occupancy --
All Policies 4,646,756
NFIP: No. of Losses Paid by Calendar Year 1978-2004
37,6
5936
,271
25,2
2043
,503
16,3
4747
,22057
,338
30,3
3352
,67862
,440
36,0
4444,6
5128
,554
14,7
6636
,247
7,75
813
,399
13,7
8938
,675
27,6
8851
,584
32,8
3123
,261
41,9
1870
,613
29,1
22
21,5
83
01000020000300004000050000600007000080000
78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04
Source: FEMA, National Flood Insurance Program (NFIP)
No. of Losses
NFIP: Loss Dollars Paid by Calendar Year 1978-2004
$147
.7$4
83.3
$230
.4$1
27.1
$198
.3 $439
.5$2
54.6
$368
.2$1
26.4
$105
.4$5
1.0
$661
.7$1
67.9 $3
53.7
$710
.2$6
59.1
$1,2
95.5
$828
.0$5
19.5
$886
.0$7
54.8
$251
.5$1
,276
.4$4
32.5
$759
.8$1
,207
.2
$411
.1$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04
Source: FEMA, National Flood Insurance Program (NFIP)
$ MillionsThe NFIP will pay an estimated $10 billion in
flood claims in 2005, indicating a need for a
taxpayer-financed bailout of at least $7.5 billion
Average Premium Preferred Risk Policy* For Buildings with Basement Under NFIP
$136$162
$204$231
$262$278
$293$330
$351
$0
$50
$100
$150
$200
$250
$300
$350
$400
$20,000 $30,000 $50,000 $75,000 $100,000 $125,000 $150,000 $200,000 $250,000
Building deductible: $500. Contents deductible: $500. Deductibles applied separately.
*Under the NFIP a low-cost Preferred Risk Policy is available to homeowners located in low- to moderate-risk areas.Sources: FEMA, National Flood Insurance Program (NFIP)
Average Premium
Average Premium Preferred Risk Policy* For Buildings without Basement
Under NFIP
$111$137
$179$206
$232$248
$263$295
$316
$0
$50
$100
$150
$200
$250
$300
$350
$20,000 $30,000 $50,000 $75,000 $100,000 $125,000 $150,000 $200,000 $250,000
Building deductible: $500. Contents deductible: $500. Deductibles applied separately.
*Under the NFIP a low-cost Preferred Risk Policy is available to homeowners located in low- to moderate-risk areas.Sources: FEMA, National Flood Insurance Program (NFIP)
Average Premium
Total Claim Payments by State (Top 11) Jan 1, 1978 - Dec. 2004
$ Millions
$2,702.0
$2,226.7
$1,727.3
$687.2$419.9 $384.4 $377.8 $276.6
$422.6$473.4$598.2
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
TX FL LA NC NJ PA SC MO VA AL MS
Source: FEMA, National Flood Insurance Program (NFIP)
Louisiana and Alabama rank 3rd and 10th
respectively in terms of total claims payments. Mississippi ranks 11th.
Total Claim Payments by State (Top 11) Jan 1, 1978 - Feb. 2006
$ Millions
$3,2
28.8
$2,7
75.0
$2,5
54.6
$600
.0
$426
.0
$425
.5
$423
.2
$14,309.1
$655
.2
$721
.2
$851
.6
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
$16,000
LA FL TX MS AL NC NJ PA NY SC CA
Source: FEMA, National Flood Insurance Program (NFIP)
Louisiana and Mississippi rank 1st and 4th respectively
in terms of total claims payments (up from 3rd and 11th pre-Katrina). Florida ranks 2nd and Texas 3rd.
APPENDIX 2 Catastrophe Facts
Key Hurricane Statistics
U.S. InsuredCatastrophe Losses ($ Billions)*
$7.5
$2.7
$4.7
$22.
9
$5.5 $1
6.9
$8.3
$7.4
$2.6 $1
0.1
$8.3
$4.6
$26.
5
$5.9 $1
2.9 $2
7.5
$57.
7
$100
$0
$20
$40
$60
$80
$100
$120
89 91 93 95 97 99 01 03 05
*Excludes $4B-$6b offshore energy losses from Hurricanes Katrina & Rita.Note: 2001 figure includes $20.3B for 9/11 losses reported through 12/31/01. Includes only business and personal property claims, business interruption and auto claims. Non-prop/BI losses = $12.2B.Source: Property Claims Service/ISO; Insurance Information Institute
$ Billions
2005 was by far the worst year ever for insured
catastrophe losses in the US, but the worst has yet to come.
$100 Billion CAT year is coming soon
Global Number of Catastrophic Events, 1970–2005
0
50
100
150
200
250
19
70
19
72
19
74
19
76
19
78
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
Natural catastrophes Man-made disasters
Man-made disasters: without road disasters. Source: Swiss Re, sigma No. 1/2005 and 2/2006.
The number of natural and man-made
catastrophes has been increasing on a global
scale for 20 years
Record 248 man-made CATs &
record 149 natural CATs in 2005
Insured Property Catastrophe Losses as % Net Premiums Earned, 1983–2005E
0%
2%
4%
6%
8%
10%
12%
14%
16%
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
E
USWorldwideUS average: 1984-2004
*Insurance Information Institute figure of 13.8% for 2005 based estimated 2005 DPE of $417.7B and insured CAT losses of $57.7B.
Sources: ISO, A.M. Best, Swiss Re Economic Research & Consulting; Insurance Information Institute.
US CAT losses were a record 13.8% of
net premiums earned in 2005 and were 4.2 times the 1984-2004 average
of 3.3%
2005 Was a Busy, Destructive, Deadly & Expensive Hurricane Season
Source: WeatherUnderground.com, January 18, 2006.
All 21 names were used for the first
time ever, so Greek letters were used for the final 6
storms: Alpha though Zeta
2005 set a new record for the number of hurricanes &
tropical storms at 27, breaking the old record set in 1933.
Number of Major (Category 3, 4, 5) Hurricanes Striking the US by Decade
4
6
65
4
6
88
5
8
6
9
1900s 1910s 1920s 1930s 1940s 1950s 1960s 1970s 1980s 1990s 2000s
*Figure for 2000s is extrapolated based on data for 2000-2005 (6 major storms: Charley, Ivan, Jeanne (2004) & Katrina, Rita, Wilma (2005)).Source: Tillinghast from National Hurricane Center: http://www.nhc.noaa.gov/pastint.shtm.
10
1930s – mid-1960s:
Period of Intense Tropical Cyclone Activity
Mid-1990s – 2030s?
New Period of Intense Tropical Cyclone Activity
Tropical cyclone activity in the mid-1990s entered the active
phase of the “multi-decadal signal” that could last into the 2030s
Already as many major storms in
2000-2005 as in all of the 1990s
Top 10 Most Costly Hurricanes in US History, (Insured Losses, $2005)
$3.5 $3.8 $4.8 $5.0$6.6 $7.4 $7.7
$9.4
$21.6
$40.0
$0
$5
$10
$15
$20
$25
$30
$35
$40
$45
Georges(1998)
Jeanne(2004)
Frances(2004)
Rita (2005)
Hugo(1989)
Ivan (2004)
Charley(2004)
Wilma(2005)
Andrew(1992)
Katrina(2005)
$ B
illio
ns
Sources: ISO/PCS; Insurance Information Institute.
Seven of the 10 most expensive hurricanes in US history
occurred in the 14 months from Aug. 2004 – Oct. 2005:
Katrina, Rita, Wilma, Charley, Ivan, Frances & Jeanne
Insured Loss & Claim Count for Major Storms of 2005*
$1.1
$38.1
$9.4$5.0
104
381
1,025
1,752
$0.000
$5.000
$10.000
$15.000
$20.000
$25.000
$30.000
$35.000
$40.000
$45.000
Dennis Rita Wilma Katrina
Size of Industry Loss ($ Billions)
Insu
red
Lo
ss (
$ B
illio
ns)
02004006008001,0001,2001,4001,6001,8002,000
Cla
ims
(th
ou
san
ds)
Insured Loss Claims
*Property and business interruption losses only. Excludes offshore energy & marine losses.
Source: ISO/PCS as of February 8, 2006 for Dennis, Rita, Katrina and March 27, 2006 for Wilma; Insurance Information Institute.
Hurricanes Katrina, Rita, Wilma & Dennis produced a record 3.3
million claims
Inflation-Adjusted U.S. Insured Catastrophe Losses By Cause of Loss,
1985-2004¹
Utility Disruption0.1%
Terrorism9.7% All Tropical Cyclones3
34.6%
Tornadoes2
30.4%
Water Damage0.2%
Civil Disorders0.5%
Fire6
2.9%
Wind/Hail/Flood5
3.4%
Earthquakes4
8.4%
Winter Storms9.7%
Source: Insurance Information Institute estimates based on ISO data.
1 Catastrophes are all events causing direct insured losses to property of $25 million or more in 2004 dollars. Catastrophe threshold changed from $5 million to $25 million beginning in 1997. Adjusted for inflation by the III.2 Excludes snow. 3 Includes hurricanes and tropical storms. 4 Includes other geologic events such as volcanic eruptions and other earth movement. 5 Does not include flood damage covered by the federally administered National Flood Insurance Program. 6 Includes wildland fires.
Insured disaster losses totaled $221.3 billion from
1984-2004 (in 2004 dollars). After 2005 season, tropical
cyclones will account for about 45% of the total.
The 2006 Hurricane Season:
Preview to Disaster?
Outlook for 2006 Hurricane Season
Average* 2005 2006F
Named Storms 9.6 26 17
Named Storm Days 49.1 115.5 85
Hurricanes 5.9 14 9
Hurricane Days 24.5 47.5 45
Intense Hurricanes 2.3 7 5
Intense Hurricane Days 13 7 13
Net Tropical Cyclone Activity 100% 275% 195%
*Average over the period 1950-2000.Source: Dr. William Gray, Colorado State University, April 4, 2006.
Probability of Major Hurricane Landfall (CAT 3, 4, 5) in 2006
Average* 2006F
Entire US Coast 52% 81%
US East Coast Including Florida Peninsula
31% 64%
Gulf Coast from FL Panhandle to Brownsville, TX
30% 47%
ALSO…Above-Average Major Hurricane
Landfall Risk in Caribbean for 2006
*Average over past century.
Source: Dr. William Gray, Colorado State University, April 4, 2006.
Hurricanes Katrina, Rita & Wilma:
Their Place in History
Hurricane Katrina Insured Loss Distribution by State ($ Millions)*
Mississippi, $12,105 , 31.8%
Louisiana, $24,275 , 63.7%
Tennessee, $59.0 , 0.2%Florida, $543.0 , 1.4%
Georgia, $27.0 , 0.1%Alabama, $1,102 ,
2.9%
*As of February 8, 2006Source: PCS division of ISO.
Louisiana accounted for
64% of the insured losses
paid and 56% of the claims filed
Total Insured Losses =
$38.111 Billion
Hurricane Katrina Loss Distribution by Line ($ Billions)*
Homeowners, $17,694.0 , 46%
Commercial Property & BI, $18,278.0 , 48%
Vehicle, $2,139.0 , 6%
Total insured losses are
estimated at $38.1 billion from 1.7518
million claims. Excludes $2-
$3B in offshore energy losses
*As of February 8, 2006Source: PCS division of ISO.
Hurricane Katrina Claim Count Distribution by State*
Mississippi, 515,000 , 29.4%
Tennessee, 15,000 , 0.9%
Louisiana, 975,000 , 55.7%
Florida, 115,000 , 6.6%
Georgia, 7,800 , 0.4%
Alabama, 124,000 , 7.1%
*As of February 8, 2006Source: PCS division of ISO.
Louisiana accounted for 64%of insured
losses paid and 56% of claims filed
Total # Claims = 1,751,800
Hurricane Rita Loss Distribution, by Line ($ Millions)*
Homeowners, $2,944.0 , 59%
Commercial Property & BI, $1,846.2 , 37%
Vehicles, $186.0 , 4%Total insured
losses are estimated at $5.0
billion (excl. offshore energy of $2-$3B) from 381,000 claims.
*As of February 8, 2006Source: PCS division of ISO.
Hurricane Rita Claim Count Distribution by State*
Texas, 169,000 , 44.4%
Tennessee, 3,500 , 0.9%
Louisiana, 185,000 , 48.6%
Arkansas, 5,500 , 1.4%
Florida, 6,000 , 1.6%
Alabama, 5,000 , 1.3%
Mississippi, 7,000 , 1.8%
*As of February 8, 2006Source: PCS division of ISO.
Louisiana accounted for 48.6% of the
insured losses, Texas 44.4%.
Excludes offshore energy losses of $2-3BTotal # Claims
= 381,000
Hurricane Wilma Loss Distribution by Line ($ Millions)*
Homeowners, $6,600 , 71%
Commercial Property & BI, $2,000 , 21%
Vehicle, $750 , 8%Total insured
losses are estimated at $9.35 billion from 1.025
million claims
*As of March 27, 2006. All losses are in FL.Source: PCS division of ISO.
Hurricane Wilma Claim Count Distribution by Line ($ Millions)*
Homeowners, 680,000 , 66% Commercial
Property & BI, 80,000 , 8%
Vehicle, 265,000 , 26%
Total insured losses are
estimated at $9.35 billion from 1.025
million claims
*As of March 27, 2006. All losses are in FL.Source: PCS division of ISO.
Insurance Information Institute On-Line
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