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As we approach the first anniversary of Superstorm Sandy, I’ve been reflecting on my own experience of the event.

Living in New York at the time, I sat tight in my apartment as the storm headed toward the New Jersey coastline. A meteorologist at heart, I watched with concern and fascination as the disaster unfolded on TV, until my power cut out.

The following morning, with no power and most of lower Manhattan shut down, I took a walk downtown to explore the impact of the storm.

I passed many downed trees and the signs of flood inundation from the surge were clear to see.

Sandy trees

Downed trees in the village on Houston Street, NYC after Sandy.

As I walked down Broad Street in the financial district, a very noticeable consequence of the flooding could be smelled in the air and observed across the ground. An oily sheen covered the street as basement oil tanks in commercial buildings in the area had flooded and leaked, their contents subsequently spread by the floodwaters.

 flooded car

Bentley parked in Tribeca. The back seat shows signs that the whole car had flooded.

In the year after Sandy, this contamination issue has also been observed in other flood events.

After the significant summer flooding that impacted central Europe, RMS sent a reconnaissance team to inspect the damage. Basement-level heating tanks leaking oil were commonly observed, adding to the cost of cleanup, due to the cost of replacement and decontamination.

Contamination on a much larger scale occurred three months later, in the devastating Colorado floods. During this event, floodwaters reached oil and gas wells in the region, prompting concerns over contamination and significant potential environmental and financial costs.

Superstorm Sandy

Water pumping in the financial district, NYC, after Superstorm Sandy.

While the physical damage and business interruption from flood events are significant, each of these events highlights how important the issue of contamination can be. Contaminated properties will take longer and cost more to repair but the negative environmental and health consequences can also be significant both in their impact and cost.

Contamination coverage may not be included in all property insurance policies, but where it is provided, it could represent an unexpected additional cost from these events. However, it is the potential liability cost associated with this hazard that should perhaps be of most concern to the insurance industry.

Various forms of advice exist surrounding how to design properties to protect them against flood damage but there is no guarantee that a risk will be compliant with a proposed guideline. The onus must be for the insurance industry to fully understand the risks they are providing coverage to.

Contamination poses an issue for the insurance industry, as modeling this risk would be very complex. The mode of damage and probability of occurrence will be difficult to represent and the combination of policy terms stretches beyond the realms existing solutions.

It has been widely noted in recent years that a proportion (either the peril itself or a component of the loss from a modeled peril) of global insured losses are not modeled.

Looking to the future, the industry will need tools that have the potential to evaluate all sources of risk; the exposures, the relevant policy terms and the non-modeled sources of loss.

While the industry may not be able to avoid surprises in the future, such as a large contamination loss, with improved technology (re)insurers should at least be equipped with the tools to explore such potential surprises.

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January 15, 2015
Lessons Hidden In A Quiet Windstorm Season

Wind gusts in excess of 100mph hit remote parts of Scotland earlier this month as a strong jet stream brought windstorms Elon and Felix to Europe. The storms are some of the strongest so far this winter; however, widespread severe damage is not expected because the winds struck mainly remote areas. These storms are characteristic of what has largely been an unspectacular 2014/15 Europe windstorm season. In fact the most chaotic thing to cross the North Atlantic this winter and impact our shores has probably been the Black Friday sales. This absence of a significantly damaging windstorm in Europe follows on from what was an active winter in 2013/14, but which contained no individual standout events. More detail of the characteristics of that season are outlined in RMS’ 2013-2014 Winter Storms in Europe report. There’s a temptation to say there is nothing to learn from this year’s winter storm season. Look closer, however, and there are lessons that can help the industry prepare for more extreme seasons. What have we learnt? This season was unusual in that a series of wind, flood, and surge events accumulated to drive losses. This contrasts to previous seasons when losses have generally been dominated by a single peril—either a knockout windstorm or inland flood. This combination of loss drivers poses a challenge for the (re)insurance industry, as it can be difficult to break out the source of claims and distinguish wind from flood losses, which can complicate claim payments, particularly if flood is excluded or sub-limited. The clustering of heavy rainfall that led to persistent flooding put a focus on the terms and conditions of reinsurance contracts, in particular the hours clause: the time period over which losses can be counted as a single event. The season also brought home the challenges of understanding loss correlation across perils, as well as the need to have high-resolution inland flood modeling tools. (Re)insurers need to understand flood risk consistently at a high resolution across Europe, while understanding loss correlation across river basins and the impact of flood specific financial terms, such as the hours clause. Unremarkable as it was, the season has highlighted many challenges that the industry needs to be able to evaluate before the next “extreme” season comes our way.…

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November 04, 2014
What to expect this 2014-2015 Europe Winter Windstorm Season
Adrian Mark
Adrian Mark
Senior Manager, Model Product Strategy, RMS

As a member of RMS' model solutions team, Adrian works to guide more informed usage of catastrophe models and enhance understanding of model uncertainty. This requires interaction with the market, as well as other important stakeholders such as regulators and rating agencies, to help RMS develop tools that capture the evolving needs of the risk management industry. Based in London, his primary focus is on supporting the RMS European modeling suite and in facilitating client understanding around the open modeling capabilities of RMS(one). Adrian holds a BS in meteorology and oceanography from the University of East Anglia and an MS in engineering in the coastal environment from the University of Southampton.

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