Friday, May 31, 2013

2013 Hurricane Season Is Upon Us

June 1 begins the 2013 hurricane season and the prognosticators are predicting an "active" hurricane season.  Concurrently, a recent report prepared by CoreLogic shows that New York is near the top of the list for potential storm surge damage to property.  The report entitled "CoreLogic Storm Surge Report" sets out data for residential property throughout the US and matches property values to likely damage caused by storm surges brought on by hurricanes and other tropical storms.  Coastal residences across the US in storm surge danger total $1.1 trillion in potential exposure.  Most of these homes are covered by homeowners insurance and, hopefully, flood insurance.  An active hurricane season can mean a significant insured loss for the homeowners' insurance market and another disaster for the National Flood Insurance Program.

Key highlights of the 2013 CoreLogic analysis include:
  • There are more than 4.2 million residential properties exposed to storm-surge risk valued at roughly $1.1 trillion, with more than $658 billion of that risk concentrated in 10 major metro areas.
  • Florida tops the state rankings with nearly 1.5 million properties at risk and $386 billion in total potential exposure to damage.
  • Louisiana ranks second in total properties at risk with just over 411,000 homes in storm-surge zones. New York ranks second in total value of coastal properties exposed at nearly $135 billion.
  • At the local level, the New York metropolitan area, which encompasses northern New Jersey and Long Island as well, contains not only the highest number of homes at risk for potential storm-surge damage, but also the highest total value of residential property exposed, at more than $200 billion.
The report also goes into climate change and its affect on residential coastal properties.  The scary part is that the values discussed in this report only reflect residential properties.  Add on commercial property, governmental property, and the collateral damage caused by the type of disruption that occurred in the aftermath of Sandy, the numbers increase exponentially. 

There has been a lot of rebuilding and retrofitting going on in NY and NJ and CT after Sandy.  The NYC Transit Authority just started running the A train to Rockaway (and has installed a seawall to protect the tracks from storm surge arising in Jamaica Bay).  Let's hope the efforts to rebuilt with resiliency work and that we pass the 2013 hurricane season with a minimum of harm.

Tuesday, May 21, 2013

When Tornadoes Strike

All of us at TIPS and the TIPS Task Force on Disaster Preparedness and Response are saddened by Monday's events and send our best wishes and offers of help to those struggling to cope with the devastation of Monday's tornadoes.   Tornadoes, like hurricanes, earthquakes, and other acts of nature, can cause significant personal and commercial harm.  Those who live in tornado country have long since had preparedness and response plans for tornadoes.  But the devastation caused by Monday's tornadoes can sometimes scrap well-made plans. 

As the search and rescue goes on, the local communities will assess the preparedness and response that took place and make refinements to those plans.  While the tornado drills help and keep people - especially children - calm, nothing can prepare for the collapse of buildings and roofs on top of people.  And it is the first responders who need to be thanked for immediately rushing to the schools and other buildings to pull people out as quickly as possible.

Those living in what they call Tornado Alley typically have tornado shelters and local communities have tornado sirens that warn of approaching storms.  In discussing the storm yesterday, the Governor of Oklahoma remarked that after a tornado hits, people must continue to listen to the weather forecasts because follow-on funnels may pop up and surprise those left exposed by the earlier destruction.  Other preparedness tips include having:
  • Food for seven days and keep in mind you may not have the means to heat or otherwise prepare the food, so it must be where it can be literally eaten from the can or package
  • Medical supplies and include any medications that must be taken on a daily basis (maintenance medication)
  • Two thermal (Mylar) blankets for each person, one to wrap in and one for ground cover
  • Rain gear for each individual
  • Insect repellent and netting if applicable
  • Tools and materials to make emergency repairs to the home to include waterproof tarps, plastic, tape (duct), and/or plywood sheeting.
FEMA has a tornado preparedness page at http://www.ready.gov/tornadoes.  The Red Cross has a free Tornado App for download.

Be safe and be prepared, and don't be a hero.  A Tornado warning is nothing to laugh about.

Thursday, May 16, 2013

The Cost of Disasters

The cost of disasters worldwide and on a national level are rising.  A new UN report released on May 15 puts the cost of natural disasters at $2.5 trillion so far for this century.  The study was conducted by the UN International Strategy for Disaster Risk Reduction.  The study focuses on businesses and their failure to take adequate catastrophe-proofing precautions.  Interestingly, one of the comments relates to insurance and states that insurers only cover a segment of the risk.  In emerging markets, insurance coverage may be less than 10% of the risk compared to insurance coverage of 90% in the US for businesses.  Global companies need to consider the possibility of natural disasters when considering facilities in emerging markets and to look at more than the political and market risks, currency fluctuations, or litigation.

These are very interesting comments.  Clearly, insurance does not cover everything (even all-risk policies have exclusions).  Financial reporting is now forcing companies to consider climate change issues and may soon require consideration of the risk of natural disasters to assets in areas prone to natural disasters.  Something for all businesses to consider when locating plants, offices, distribution centers, and other facilities.

In New York, the cost of Superstorm Sandy is being mitigated by a home buyout plan.  but recent reports indicate that the buyout plan is going to be much smaller than originally proposed.  This means that a repeat of Sandy for those who stay and rebuild is possible.  This raises the cost of disasters on insurers and the government and precludes the lofty goal of reshaping the shoreline to avoid clean-up costs.  Buyouts and returning shoreline to nature in concept is an interesting and less costly option than rebuilding and suffering another disaster.  But in developed shoreline communities, it is difficult to convince landowners to accept a buyout and move to higher ground.  One expert commented that this is a new program and it has to start slowly and hopefully build momentum for future buyouts.

We welcome your comments.