HURRICANES
As KCC Revises Insured Helene Loss to $6.4B, Guy Carpenter Exec Touts Community Flood Insurance
OLDWICK, N.J. //BestWire// - The mammoth gap between economic and insured losses caused by Hurricane Helene could spark interest not only in mitigation but community-based disaster insurance programs like the one his company, Swiss Re and insurtech Raincoat are piloting in New York City, according to Guy Carpenter Global Head of Peril Advisory Josh Darr.
(Photo by MIGUEL J. RODRIGUEZ CARRILLO/AFP via Getty Images)Estimated insured losses for the Category 4 storm are in the single-digit billions of dollars — a new Karen Clark & Co. flash estimate sets privately insured wind, storm surge and inland flooding losses across nine states at $6.4 billion — compared to triple-digit economic loss estimates.
“In contrast to a typical Category 4 hurricane, most of the damage occurred far from the landfall point, with higher wind damage in Georgia than Florida, more surge damage in Tampa and the most significant inland flood damage in North Carolina,” KCC said.
But, Darr cautioned, some “surprises are yet to be written,” including the potential cost of claims that must be adjusted, even if no payouts are made, and business losses with ripple effects.
For instance, the storm shut down quartz mines in the Blue Ridge Mountains that are critical to the global semiconductor and solar industries.
Global materials supplier Sibelco said it has temporarily halted operations because Helene caused widespread flooding, power outages, communication disruptions and damage to critical infrastructure in and around Spruce Pine, North Carolina.
Darr compared the situation to extreme flooding in Thailand that disrupted the global automobile industry in 2011.
More than 100,000 buildings from Florida to West Virginia were impacted by Helene according to satellite mapping firm ICEYE. At least 10,000 buildings were inundated by five feet or more of water in Florida, Georgia, South Carolina, North Carolina, Tennessee, Virginia or West Virginia, it said (BestWire, Sept. 30, 2024).
The great majority of Helene damage was caused by storm surge along the west coast of Florida, even though Helene remained far out in the Gulf before making landfall on Sept. 26 with 140 mph winds in the Big Bend region, and inland flooding in southeast states.
After most storms the cost of investigating claims that end up closed without payment doesn’t noticeably impact carriers, said Darr. But the sheer number of properties impacted by Helene could change the calculus.
“We’ve seen this story before with wind and water, with not only clarity of terms and conditions but adjudication of those damages. From an insurer standpoint if there is clearly a flood loss there are still adjustment expenses to go out and analyze that loss... 100,000 buildings impacted across a region can become an appreciable expense to the insurers," he said.
Helene was the third hurricane to make landfall in the Big Bend area since August last year. Through Oct. 1 carriers had taken in 65,716 claims, according to Florida Office of Insurance Regulation data. That exceeds the roughly 25,000 claims taken in after Category 3 Hurricane Idalia last year and less than 22,000 claims reported for Category 1 Debby earlier this year.
The extent of uninsured losses may help galvanize society to expand solutions addressing the insurance gap for flood and rain disasters in the United States, said Darr.
Since 1996, 99% of U.S. counties have experienced a flood, the Federal Emergency Management Agency said, but just 4% of homeowners carry flood insurance.
Even so, the amount the National Flood Insurance Program paid out for claims jumped more than 660% to $62.2 billion from 2000 to 2020, compared to the prior 20-year period, when the tab was $9.4 billion.
FEMA attributed the increase to the changing climate, noting a five-to-eight-inch sea level rise recorded by NASA for the past 100 years.
State and federal bodies need to consider a climate change quantification, Darr said at Guy Carpenter. Coastal flooding, which was severe on Florida’s west coast despite Helene’s distance from shore until landfall, is “absolutely an imprint of rising seas.”
And, he added, the greatest differences on a percentage for economic compared to insured losses have all “involved water... Katrina, Sandy, Harvey.”
Hurricane Sandy made landfall in late October 2012 in South Jersey. The combination of a high tide, winds from the large system and storm surge caused catastrophic damage. In New York City nearly 90,000 buildings were in the inundation zone, infrastructure was flooded and closed and $19 billion of damages were recorded by the city.
Guy Carpenter, Swiss Re Corporate Solutions, insurtech Raincoat, ICEYE and city organizations have now partnered with the Center for NYC Neighborhoods on a parametric flood policy pilot to support low- and moderate-income communities in high-flood-risk neighborhoods with emergency cash funds after a major flood.
CNYCN purchased the policy in 2023 and 2024. “Following a flooding event in pilot neighborhoods, data will be analyzed to determine whether the event is a qualifying event, using a mix of satellite data, on-the-ground real-time sensors, and social media images compiled by... ICEYE. The Mayor’s Office of Climate & Environmental Justice, along with Guy Carpenter, provide advisory support,” it said.
If the policy is triggered, local case managers will decide grants to support affected households recovering from flooding. The payout from Swiss Re to CNYCN would be based on the severity of the flood.
“Through this model, funds can be released almost immediately to help the most affected communities with urgent post-disaster needs,” CNYCN said in a statement.
This program, said Darr, can educate people, promulgate risk transfer and improve lives by providing a pooling mechanism.
Were the program in effect in communities hard hit by flooding during Helene, it would have been “very valuable,” he said.
(By Renée Kiriluk-Hill, senior associate editor, BestWire: Renee.Kiriluk-Hill@ambest.com)