Monthly Archives: September 2017

Calculating the Insured Loss After Maria

Michael Young, Head of Americas Climate Model Product Management, RMS

The story of Hurricane Maria, the thirteenth named storm of the 2017 North Atlantic hurricane season, really started with landfall over Dominica on Tuesday, September 19 — as a category 5 hurricane. It was then Puerto Rico’s turn. As Maria approached, the system did weaken slightly during an eyewall replacement cycle, and made landfall on Wednesday, September 20, near Yabucoa, as a category 4 hurricane. It was the most intense landfalling hurricane for the island since the 1928 San Felipe Segundo Hurricane, with RMS HWind reporting maximum sustained winds of 130 miles per hour (209 kilometers per hour).

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Maria: What Is the Impact on Industry in Puerto Rico?

Peter Datin, senior principal modeler, RMS

Rajkiran Vojjala, vice president – Model Development, RMS

Last week, Hurricane Maria churned across Puerto Rico with the strongest winds to hit the island in over 80 years. Puerto Rico is home to more than 50 percent of the world’s leading pharmaceutical and life science companies, which operate around 80 U.S. Food and Drug Administration (FDA) approved manufacturing plants on the island. Therefore, the impact of Maria on the industrial line of business not only influences the overall losses experienced in the event, but critically has many ramifications for Puerto Rico’s long-term economic recovery.

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It’s What’s On The Inside That Counts

Most people use this phrase when it comes to judging a person’s character, but few would think to use it when assessing a building’s preparedness against damage from seismic activity. Cracked foundations, toppled walls, and collapsed buildings are normally what comes to mind when envisioning a building damaged from an earthquake; and while they are of course costly to repair, surprisingly this type of damage is not the main cause of loss to insurers.

Over 70 percent of a building’s value comes from non-structural elements such as internal and external cladding, interior walls, glazing and the internal fit-out, such as heating and air conditioning systems, pipes, ceiling support systems, and lighting. Building codes dictate how these internal systems should be installed and detail the necessary seismic restraints to keep them in place in the event of intense ground shaking. Failure to properly implement these measures can result in significant damage and expensive payouts, even if the structural integrity and exterior of the building remains intact. Recent global earthquake events such as Kaikoura in 2016 reflect this and have shown that non-structural damage drives claims.

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Doing Business With a Better High Definition Flood Model: From Flood Re to Harvey

When we set out to design the latest generation RMS High Definition (HD) flood loss models we identified five key challenges:

a) Resolution: Neighboring properties separated by a few feet in elevation can have dramatically different flood risk costs. However, the finer the model resolution, the bigger the hazard and loss files — and the slower the modeling. We needed an objective way of determining the best trade-offs around model resolution.

b) Duration: Once groundwater levels are raised, more precipitation can set off another round of flooding. The climatology can persist, bringing;

  • a succession of storms on the same path, or
  • a fixed long lasting atmospheric river, or
  • a procession of rain bands from a stalled circulation parked at the coast as from Hurricane Harvey.

Flooding episodes can endure for days and weeks, but reinsurers want a predetermined definition of event duration. The model needed to provide the flexibility to explore how event duration affects results.

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New Florida Flood Modeling Standards Will Help Develop the Insurance Market

Hurricane Irma has placed flooding firmly back on the agenda for Florida. Irma did affect the entire state and flooding was widespread, affecting areas from Brickell in Miami’s financial district, to the northern counties. With dire storm surge forecasts predicted for the Gulf Coast, a new storm surge record was set in Jacksonville, but places such as Tampa, St. Petersburg, Naples, and Fort Myers experienced shallower flood depths than the predictions.

Florida homeowners are more aware of flood risk than most — and are well versed in buying flood insurance. For those who live in high-risk flood areas and have a mortgage from a federally regulated or insured lender, it is a mandatory requirement to purchase flood insurance from either the National Flood Insurance Program (NFIP) or alternatively through a private flood insurer.

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Puebla Earthquake: Echoes of Michoacán

On the morning of Tuesday, September 19, people across Mexico had taken part in the annual national earthquake drill and other remembrance activities, to commemorate 32 years since the 1985 Mw8.0 Michoacán Earthquake. Michoacán was the most devastating earthquake in Mexico’s history, leaving at least 9,500 people dead and more than 100,000 homeless.

No one could have imagined at the time of these drills that a little more than two hours later, at precisely 1:14 pm local time (CDT), they’d be experiencing a real earthquake, the same day as Michoacán, as the Mw7.1 “Puebla” earthquake struck Mexico City and surrounding states. The improbable had become reality.

RMS estimates that the Puebla earthquake caused between US$4 billion and US$8 billion in economic property losses and as much as US$1.2 billion in insured property losses. This estimate accounts for shake-only losses to building, contents and business interruption, including the effects of liquefaction and landslides.

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Hurricane Maria Continues its Northward Track

09:30 UTC  Monday, September 25

Michael Kozar, senior modeler – Model Development, RMS

The latest track probability analysis of the current model forecasts for Hurricane Maria has been released by the RMS HWind team, based on forecast models initialized at 12:00 UTC Sunday, September 24. This proprietary track forecast probability product from RMS HWind provides unique insight into the likelihood of where a storm might go, to help deliver insights beyond what is available from public sources.

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EXPOSURE Magazine: Essential Insight for Changing Times

I invite you to explore the latest digital edition of EXPOSURE Magazine, which also hit the streets of Monte Carlo as a print edition for those attending Les Rendez-Vous de Septembre, and will be available at RMS events over the coming months.

There is a clear mission for EXPOSURE, which is “… to provide insight and analysis to help insurance and risk professionals innovate, adapt and deliver.” And change is in the air for all businesses in the industry, whether it is developing new opportunities, getting products to market faster, being more agile and efficient, or using data-driven insight to transform decision making.

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Equifax Data Heist: Patching Up a Familiar Problem

The recent Equifax incident was by all measures a significant cyberattack. As the press statement released by Equifax on September 8 highlighted, the data theft potentially impacted approximately 143 million U.S. consumers. To put this into perspective this represents nearly 70 percent of the U.S. working population.

However, we should not be surprised. RMS tracks data theft among other types of cyber events on an ongoing basis, and we have seen numerous events of this magnitude or larger over the last few years. This Equifax breach would have ranked just #7 on the list of the largest data breaches in the 2017 RMS Cyber Risk Landscape report.

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Is “Hurricane Fatigue” Set to Continue?

The midway point of the Atlantic hurricane season has just passed, and despite a relatively tame start, we have already witnessed two major U.S. hurricane landfalls — Harvey and Irma — in quick succession. It is the first calendar year on record where two hurricanes of Category 4 strength or greater have made landfall in the contiguous U.S. To add insult to injury, Maria has quickly intensified and is expected to be the fourth major hurricane of the season as it tracks through the Leeward Islands, an area left devastated by Irma less than two weeks ago.

With 13 named storms, seven hurricanes, and three major hurricanes, we have already met the National Oceanic and Atmospheric Administration (NOAA) definition of an above-average full Atlantic hurricane season. It is understandable that many in the insurance industry may be suffering from “hurricane fatigue” well before the calendar flips over to October.

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