Transcript No Slide Title

The Challenge of
Communicating Flood
Risk
2006 National Flood Conference
National Flood Insurance Program
May 9, 2006
Robert P. Hartwig, Ph.D., CPCU, Senior Vice President & Chief Economist
Insurance 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 Insurance
QUESTIONS
• 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)*
AL Storm Surge Loss,
$793 , 1.8%
MS Storm Surge Loss,
$4,400 , 10.0%
LA Storm Surge Loss,
$16,200 , 36.8%
FL Storm Surge Loss,
$32 , 0.1%
Hurricane Katrina
caused $44 billion
in flood and storm
surge damage, most
of it uninsured,
88.1% of it in
Louisiana
New Orleans Flood
Loss, $22,600 , 51.3%
*Value of property damage by flood and storm surge whether or not insured.
Source: AIR Worldwide, September 29, 2005.
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*
1,961 1,882
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.
Media Coverage of Flood Insurance
in the US Overall, 2000-2006E*
8,000
1,919
3,128
2,177
3,368
2,994
2,000
1,882
2,714
4,000
1,961
2,761
6,000
2000
2001
2002
2003
2004
5,772
10,000
US newspaper coverage of
flood insurance rose an
estimated 165% between 2003
and 2006 and rose 293%
across all print media
10,526
12,000
13,242
6,377
14,000
US-All Print Media**
4,647
US*
0
2005
2006E
*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.
Media Coverage of Flood Insurance
in LA & MS, 2000-2006E*
1,600
LA
1,518
MS
1,400
1,200
1,000
800
600
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.
804
479
349
400
200
76
111
20
20
2000
2001
108
124
26
55
122
45
0
2002
2003
2004
*Newspaper coverage as of May 8, 2006. 2006 is III estimate.
Source: Insurance Information Institute analysis based on Nexis search.
2005
2006E
Media Coverage of Flood Insurance
in Florida, 2000-2006E*
700
600
500
Media coverage of flood
insurance in Florida rose an
estimated 184% between
2003 and 2005 but may fall
by 30% in 2006
655
463
456
400
300
215
231
227
200
161
100
0
2000
2001
2002
2003
2004
*Newspaper coverage as of May 8, 2006. 2006 is III estimate.
Source: Insurance Information Institute analysis based on Nexis search.
2005
2006E
Media Coverage of Flood Insurance
in New York State, 2000-2006E*
171
180
160
140
120
Media coverage of flood
insurance in New York State
rose an estimated 175%
between 2003 and 2006
146
100
80
65
64
60
40
38
34
36
2001
2002
2003
20
0
2000
2004
*Newspaper coverage as of May 8, 2006. 2006 is III estimate.
Source: Insurance Information Institute analysis based on Nexis search.
2005
2006E
California Hazards: % People
Stating Prepared/Very Prepared
10%
0%
Los Angeles
Bay Area
Sacramento
San Diego
Source: Insurance Information Network of California Survey, February 2006.
Central
Valley
21%
19%
32%
31%
34%
25%
33%
24%
17%
25%
33%
35%
42%
48%
49%
Wildfire
Tsunami
43%
44%
19%
22%
32%
34%
29%
33%
18%
20%
25%
30%
27%
40%
34%
50%
44%
47%
60%
Earthquake
Storms
28%
Flood
Slides
The Flood
Insurance Purchase
& Retention
Decision
Flood Insurance is a
Tough Sell
Flood Insurance in Force,
$740
$720
$700
4.58
$801.9
$792.3
4.78
$870.2
$860.6
4.85
4.83
4.80
4.73
4.68
4.65 4.66
4.59 4.60 4.60
NFIP policy count is up 6%
Mar. 2005 – Feb. 2006.
Exposure is up 15.0%
$680
4.90
4.85
4.80
4.75
4.70
4.65
4.60
4.55
4.50
4.45
4.40
Mar- Apr- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb05
05
05
05
05
05
05
05
05
05
06
06
Source: FEMA/NFIP web site accesses 5/8/06: http://www.fema.gov/business/nfip/statistics/stats.shtm.
Policies in Force (Millions)
$760
$773.4
$780
$756.7
$800
$768.5
$820
$784.7
Number of Policies
$840
$811.1
$860
$828.5
Insurance in Force ($B)
$756.7
Insurance in Force ($ Billions)
$880
$851.5
March 2005-February 2006
Flood Insurance Retention Rates,
March 2005-February 2006
80%
92.5%
90.6%
93.1%
93.2%
92.7%
93.2%
92.0%
92.1%
89.3%
88.8%
91.9%
92.0%
90.6%
91.6%
91.0%
Flood insurance retention rates are a
problem. Program lapse rate is too high.
Customer acquistion is expensive.
A
ug
Se -04
pO 04
ct
N -04
ov
D -04
ec
Ja -04
nFe 05
bM 05
ar
A 05
pr
M -05
ay
Ju 05
nJu 05
A l-05
ug
Se -05
pO 05
ct
N -05
ov
D -05
ec
Ja -05
nFe 06
b06
75%
Source: FEMA/NFIP web site accesses 5/8/06: http://www.fema.gov/business/nfip/statistics/stats.shtm.
84.6%
85%
87.5%
90%
88.3%
95%
90.8%
100%
NFIP Flood Policy
Penetration Rates, by Region
70%
In SFHA*
Out of SFHA
61%
60%
While nearly
half of people
outside SFHAs
purchase flood
coverage, only
1% outside
SFHAs do
50%
40%
30%
60%
28%
49%
22%
20%
10%
0.6%
3%
1%
0.4%
1%
0%
Northeast
South
Midwest
West
*Special Flood Hazard Areas.
Source: The National Flood Insurance Program’s Market Penetration Rate:
Estimates and Policy Implications, RAND, 2006.
Overall US
Flood Insurance Penetration Rates:
Top 25 Counties/Parishes in US*
JEFFERSON/LA
WALTON/FL
BROWARD/FL
COLLIER/FL
LEE/FL
GALVESTON/TX
GLYNN/GA
ST. BERNARD/LA
MIAMI-DADE/FL
ORLEANS/LA
CARTERET/NC
ST. CHARLES/LA
ST. JOHNS/FL
CHARLOTTE/FL
ST. TAMMANY/LA
HORRY/SC
INDIAN RIVER/FL
BAY/FL
BRUNSWICK/NC
NASSAU/FL
BERKELEY/SC
PINELLAS/FL
BRAZORIA/TX
CHATHAM/GA
TERREBONNE/LA
0%
84.0%
81.5%
80.0%
78.7%
Highest flood insurance
77.1%
74.1%
penetration rates are in
69.6%
68.4%
LA and FL, but most
68.1%
66.7%
are underinsured
65.9%
65.5%
62.4%
59.0%
56.2%
51.6%
No counties in
49.6%
48.0%
the Northeast
46.3%
44.4%
are represented
42.8%
42.8%
in Top 25
42.0%
41.9%
40.1%
20%
40%
60%
80%
*As of 12/31/05.
Source: New Orleans Times-Picayune, 3/19/06, from NFIP and US Census Bureau data.
100%
Flood Insurance Penetration Rates:
Counties/Parishes Ranked 26-50*
BALDWIN/AL
SARASOTA/FL
PALM BEACH/FL
CHARLESTON/SC
MANATEE/FL
MARTIN/FL
ATLANTIC/NJ
LAFOURCHE/LA
OKALOOSA/FL
GEORGETOWN/SC
FLAGLER/FL
MAUI/HI
LIVINGSTON/LA
BREVARD/FL
SUSSEX/DE
VOLUSIA/FL
ST. LUCIE/FL
JEFFERSON/TX
HAMPTON CITY/VA
OCEAN/NJ
HARRIS/TX
PASCO/FL
BOSSIER/LA
NEW HANOVER/NC
BRONX/NY
0%
39.8%
39.7%
39.2%
Mid-Atlantic/Northeast
39.1%
38.7%
Counties are
37.2%
36.5%
underrepresented
36.2%
34.2%
33.0%
32.1%
30.6%
28.3%
27.6%
People along the
27.0%
26.8%
eastern
26.4%
26.1%
seaboard have
25.4%
25.3%
not gotten the
25.2%
23.4%
message
23.3%
22.1%
21.7%
10%
20%
30%
40%
*As of 12/31/05.
Source: New Orleans Times-Picayune, 3/19/06, from NFIP and US Census Bureau data.
50%
Flood Insurance Penetration Rates:
Counties/Parishes Ranked 51-75*
CAMERON/TX
FORT BEND/TX
SANTA ROSA/MS
HARRISON/MS
JACKSON/MS
NORFOLK CITY/VA
HILLSBOROUGH/FL
LAFAYETTE/LA
EAST BATON ROUGE/LA
VIRGINIA BEACH
ESCAMBIA/FL
HONOLULU/HI
SACRAMENTO/CA
CALCASIEU/LA
MONTGOMERY/TX
CITRUS/FL
MERCED/CA
CHESAPEAKE,
OSCEOLA/FL
HUDSON/NJ
DUVAL/FL
BARNSTABLE/MA
MARIN/CA
TULARE/CA
MONMOUTH/NJ
0%
21.6%
20.9%
20.1%
19.1%
18.3%
17.8%
17.7%
17.5%
16.7%
16.3%
MS coastal
15.8%
counties
15.6%
15.4%
rank
14.5%
14.0%
abysmally
13.3%
low
12.9%
12.6%
11.7%
Barnstable is only
11.6%
11.3%
county in all of
10.2%
New England
9.3%
9.1%
among Top 75
8.5%
5%
10%
15%
20%
*As of 12/31/05.
Source: New Orleans Times-Picayune, 3/19/06, from NFIP and US Census Bureau data.
25%
Proportion of Homes Buying Flood
Insurance by No. of Homes in SFHA*
66%
70%
60%
50%
Communities with
few SFHAs are the
most likely to not
buy flood insurance
56%
40%
30%
20%
16%
10%
0%
Under 500
501 - 5,000
*Special Flood Hazard Areas.
Source: The National Flood Insurance Program’s Market Penetration Rate:
Estimates and Policy Implications, RAND, 2006.
More Than 5000
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 SFHAs
 Questions about enthusiasm in selling or knowledge of agents
regarding program
• Coastal Flooding Potential
 Penetration rate much higher for coastal communities
subject to flooding versus those that are not (63% vs. 35%)
• Mandatory Purchase Requirement
Source: The National Flood Insurance Program’s Market Penetration Rate:
Estimates and Policy Implications, RAND, 2006.
Reasons Why People Buy
Flood Insurance
Agent/Broker
Recommendation,
20%
House Near Body of
Water, 24%
Not Near Water, But
Don't Want to Take
Chances, 29%
Risk aversion and
compulsion are the
two most important
direct factors
influencing the
purchase decision.
Educational
attainment & income
are also factors.
Mortgage Lender
Requirement, 27%
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.”
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 Policies
 MS Attorney General Hood, Attorney Richard Scruggs, etc.
Source: Insurance Information Institute
Percentage of California
Homeowners with Earthquake
Insurance, 1994-2004*
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.
35% 32.9% 33.2%
30%
25%
19.5%
20%
15%
17.4% 16.8%
15.7% 15.8% 14.6%
13.3% 13.8%
10%
5%
0%
94
96
97
98
99
00
01
*Includes CEA policies beginning in 1996.
Source: California Department of Insurance; Insurance Information Institute.
02
03
04
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 on
Flood Insurance
• Thousands of Media Interviews
 Stressing importance of purchasing flood
 Providing media with key information
• Video News Release (VNR) on Flood Insurance
 Pre-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 events
 Testimony 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 ago
 Levees and homes/businesses
 Would 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)
Policies in Force
Nearly 5 million property
owners per year buy
NFIP policies
$1,000
4.5 4.6 4.7 4.8 4.9
4.3 4.4 4.5
4.2
4.1
5.0
4.0
3.5
2.5 2.6
2.8
3.7
$900
$800
$700
3.0
$600
$500
2.0
$400
The NFIP insured property with a total
value of $870.2 billion as of Feb. 2006
1.0
$300
$200
0.0
91
92
93
94
95
96
97
98
99
00
*As of December 2005.
Sources: FEMA, National Flood Insurance Program (NFIP)
01
02
03
04
05* Feb06
Total Coverage ($ Billions)
Policies in Force (Millions)
6.0
3.0
Total Coverage (Exposure)
NFIP: Total Policies in Force by
Calendar Year, 1978-Feb. 2006
Millions
5
4
3
2
Nearly 5 million
property owners per
year buy NFIP policies
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
3.04
3.48
3.69
4.10
4.24
4.33
4.37
4.46
4.52
4.57
4.67
4.80
4.85
No. of Policies (Millions)
6
1
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
0
*As of December 2005
Source: FEMA, National Flood Insurance Program (NFIP)
$2.0
$1.5
$1.0
$0.5
$ Billions
The NFIP now collects
more than $2.2 billion
annually in premiums
$0.11
$0.14
$0.16
$0.26
$0.35
$0.38
$0.42
$0.45
$0.52
$0.57
$0.59
$0.63
$0.67
$0.74
$0.80
$0.89
$1.00
$2.5
$1.14
$1.28
$1.51
$1.67
$1.72
$1.72
$1.74
$1.80
$1.90
$2.05
$2.23
NFIP: Total Premium by
Calendar Year 1978-Feb. 2006
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
$0.0
Source: FEMA, National Flood Insurance Program (NFIP)
NFIP: Total Coverage (Exposure)
by Calendar Year 1978-Feb. 2006
$50.5
$74.4
$99.3
$102.1
$107.3
$117.8
$124.4
$139.9
$155.7
$165.1
$175.8
$265.2
$213.6
$223.1
$236.8
$267.9
$295.9
The NFIP insured property
with a total value of $870.2
billion as of Feb. 2006
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
$1,000
$900
$800
$700
$600
$500
$400
$300
$200
$100
$0
$349.1
$400.7
$462.6
$497.6
$534.1
$567.6
$611.9
$653.8
$691.8
$764.5
$851.5
$870.2
$ Billions
*As of December 2005.
Source: FEMA, National Flood Insurance Program (NFIP)
NFIP: Policies in Force By Coverage
Type (As of July 31, 2005)
Building
Coverage Only,
39.7%
Both Bldg. &
Cont. Cvg,
58.7%
Contents
Coverage Only,
1.5%
Coverage Type
Policies in Force
Building Coverage Only 1,845,481
Contents Coverage Only 72,008
Source: FEMA, National Flood Insurance Program (NFIP)
Both Bldg & Cont Cvg
2,729,267
All Policies
4,646,756
NFIP: Policies in Force By Occupancy
Type (As of July 31, 2005)
Other
Residential
3.0%
NonResidential
4.6%
Condos
20.5%
2 to 4 Family
Unit
3.4%
Single Family
Home
68.5%
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
25,220
36,271
37,659
16,347
43,503
57,338
47,220
30,333
62,440
52,678
21,583
27,688
38,675
13,789
13,399
7,758
36,247
14,766
28,554
44,651
36,044
51,584
23,261
32,831
41,918
29,122
80000
70000
60000
50000
40000
30000
20000
10000
0
70,613
No. of Losses
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)
$800
$600
$400
$200
$1,207.2
$1,276.4
$432.5
$759.8
$1,000
$828.0
$519.5
$886.0
$754.8
$251.5
$1,200
$ Millions
$147.7
$483.3
$230.4
$127.1
$198.3
$439.5
$254.6
$368.2
$126.4
$105.4
$51.0
$661.7
$167.9
$353.7
$710.2
$659.1
$411.1
$1,400
The 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
$1,295.5
NFIP: Loss Dollars Paid by
Calendar Year 1978-2004
$0
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)
Average Premium Preferred Risk Policy*
For Buildings with Basement Under NFIP
Average Premium
$400
$330
$350
$300
$262
$278
$351
$293
$231
$250
$204
$200
$150
$162
$136
$100
$50
$0
$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 moderaterisk areas.
Sources: FEMA, National Flood Insurance Program (NFIP)
Average Premium Preferred Risk Policy*
For Buildings without Basement
Under NFIP
Average Premium
$350
$316
$295
$300
$232
$250
$248
$263
$206
$200
$150
$179
$137
$111
$100
$50
$0
$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 moderaterisk areas.
Sources: FEMA, National Flood Insurance Program (NFIP)
Total Claim Payments by State
(Top 11) Jan 1, 1978 - Dec. 2004
Louisiana and Alabama
rank 3rd and 10th
respectively in terms of
total claims payments.
Mississippi ranks 11th.
$ Millions
$3,000
$2,702.0
$2,500
$2,226.7
$2,000
$1,727.3
$1,500
$1,000
$687.2 $598.2
$473.4 $422.6 $419.9 $384.4 $377.8
$500
$276.6
$0
TX
FL
LA
NC
NJ
PA
Source: FEMA, National Flood Insurance Program (NFIP)
SC
MO
VA
AL
MS
Total Claim Payments by State
(Top 11) Jan 1, 1978 - Feb. 2006
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.
$ Millions
$16,000
$14,309.1
$14,000
$12,000
$10,000
$600.0
$426.0
$425.5
$423.2
MS
$655.2
TX
$721.2
FL
$2,000
$851.6
$2,554.6
$4,000
$2,775.0
$6,000
$3,228.8
$8,000
NC
NJ
PA
NY
SC
CA
$0
LA
AL
Source: FEMA, National Flood Insurance Program (NFIP)
APPENDIX 2
Catastrophe Facts
Key Hurricane
Statistics
U.S. Insured
Catastrophe Losses ($ Billions)*
$100
$57.7
$27.5
$12.9
$26.5
$4.6
$8.3
$10.1
$2.6
$7.4
$5.5
93
$8.3
$4.7
91
$2.7
$20
$7.5
$40
$16.9
$60
$22.9
$80
2005 was by far the worst
year ever for insured
catastrophe losses in the US,
but the worst has yet to come.
$5.9
$120
$100
$100 Billion
CAT year is
coming soon
$ Billions
05
03
01
99
97
95
89
$0
*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
Global Number of
Catastrophic Events, 1970–2005
The number of natural
and man-made
catastrophes has been
increasing on a global
scale for 20 years
250
200
Record 248 manmade CATs &
record 149 natural
CATs in 2005
150
100
50
Natural catastrophes
Man-made disasters
Man-made disasters: without road disasters. Source: Swiss Re, sigma No. 1/2005 and 2/2006.
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
1972
1970
0
Insured Property Catastrophe Losses
as % Net Premiums Earned, 1983–2005E
16%
14%
12%
10%
US CAT losses were
a record 13.8% of
US
net premiums
Worldwide
earned in 2005 and
US average: 1984-2004 were 4.2 times the
1984-2004 average
of 3.3%
8%
6%
4%
2%
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05E
0%
*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.
2005 Was a Busy, Destructive, Deadly
& Expensive Hurricane Season
All 21 names were
used for the first
time ever, so Greek
letters were used
for the final 6
storms: Alpha
though Zeta
Source: WeatherUnderground.com, January 18, 2006.
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
1930s – mid-1960s:
Period of Intense Tropical
Cyclone Activity
Mid-1990s – 2030s?
New Period of Intense
Tropical Cyclone Activity
10
9
8
8
8
4
6
6
6
5
5
4
Tropical cyclone activity in the
mid-1990s entered the active
phase of the “multi-decadal signal”
that could last into the 2030s
6
Already as many
major storms in
2000-2005 as in all
of the 1990s
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.
Top 10 Most Costly Hurricanes in
US History, (Insured Losses, $2005)
$45
$40
$35
$ Billions
$30
$25
$20
$15
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
$10
$5
$40.0
$3.5
$3.8
Georges
(1998)
Jeanne
(2004)
$4.8
$5.0
Frances
(2004)
Rita
(2005)
$6.6
$7.4
$7.7
Hugo
(1989)
Ivan
(2004)
Charley
(2004)
$21.6
$9.4
$0
Sources: ISO/PCS; Insurance Information Institute.
Wilma
(2005)
Andrew
(1992)
Katrina
(2005)
Insured Loss & Claim Count for
Major Storms of 2005*
$45.000
$40.000
$35.000
$30.000
$25.000
$20.000
$15.000
$10.000
$5.000
$0.000
Claims
Hurricanes Katrina,
Rita, Wilma & Dennis
produced a record 3.3
1,025
million claims
1,752
$38.1
381
104
$1.1
Dennis
$9.4
$5.0
Rita
Wilma
2,000
1,800
1,600
1,400
1,200
1,000
800
600
400
200
0
Claims (thousands)
Insured Loss ($ Billions)
Insured Loss
Katrina
Size of Industry Loss ($ Billions)
*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
Inflation-Adjusted U.S. Insured
Catastrophe Losses By Cause of Loss,
1985-2004¹
Wind/Hail/Flood5
3.4%
Earthquakes4
8.4%
Civil Disorders
0.5%
6
Fire
2.9%
Water Damage
0.2%
Utility Disruption
0.1%
Winter Storms
9.7%
Terrorism
9.7%
1
Tornadoes2
30.4%
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.
All Tropical Cyclones3
34.6%
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 $25 million beginning in 1997. Adjusted for inflation by the III.
2 Excludes snow. 3 Includes hurricanes and tropical storms. 4 Includes other geologic events such as volcanic eruptions
and other earth movement. 5 Does not include flood damage covered by the federally administered National Flood
Insurance Program. 6 Includes wildland fires.
Source: Insurance Information Institute estimates based on ISO data.
The 2006 Hurricane
Season:
Preview to Disaster?
Outlook for 2006 Hurricane Season
Average*
2005
2006F
9.6
49.1
5.9
24.5
2.3
26
115.5
14
47.5
7
17
85
9
45
5
13
7
13
100%
275%
195%
Named Storms
Named Storm Days
Hurricanes
Hurricane Days
Intense Hurricanes
Intense Hurricane Days
Net Tropical Cyclone Activity
*Average over the period 1950-2000.
Source: Dr. William Gray, Colorado State University, April 4, 2006.
Probability of Major Hurricane
Landfall (CAT 3, 4, 5) in 2006
Entire US Coast
Average*
2006F
52%
81%
US East Coast Including Florida
31%
64%
Peninsula
Gulf Coast from FL Panhandle
30%
47%
to Brownsville, TX
ALSO…Above-Average Major Hurricane
Landfall Risk in Caribbean for 2006
*Average over past century.
Source: Dr. William Gray, Colorado State University, April 4, 2006.
Hurricanes Katrina,
Rita & Wilma:
Their Place in History
Hurricane Katrina Insured Loss
Distribution by State ($ Millions)*
Florida, $543.0 , 1.4%
Alabama, $1,102 ,
2.9%
Mississippi, $12,105 ,
31.8%
Total Insured
Losses =
$38.111 Billion
*As of February 8, 2006
Source: PCS division of ISO.
Tennessee, $59.0 ,
0.2%
Georgia, $27.0 , 0.1%
Louisiana
accounted for
64% of the
insured losses
paid and 56% of
the claims filed
Louisiana, $24,275 ,
63.7%
Hurricane Katrina Loss
Distribution by Line ($ Billions)*
Commercial
Property & BI,
$18,278.0 , 48%
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, 2006
Source: PCS division of ISO.
Vehicle, $2,139.0 ,
6%
Homeowners,
$17,694.0 , 46%
Hurricane Katrina Claim Count
Distribution by State*
Florida, 115,000 ,
6.6%
Tennessee, 15,000 ,
0.9%
Georgia, 7,800 , 0.4%
Alabama, 124,000 ,
7.1%
Louisiana, 975,000 ,
55.7%
Mississippi, 515,000 ,
29.4%
Total # Claims
= 1,751,800
*As of February 8, 2006
Source: PCS division of ISO.
Louisiana accounted
for 64%of insured
losses paid and 56%
of claims filed
Hurricane Rita Loss Distribution,
by Line ($ Millions)*
Commercial
Property & BI,
$1,846.2 , 37%
Total insured
losses are
estimated at $5.0
billion (excl.
offshore energy
of $2-$3B) from
381,000 claims.
*As of February 8, 2006
Source: PCS division of ISO.
Vehicles, $186.0 ,
4%
Homeowners,
$2,944.0 , 59%
Hurricane Rita Claim Count
Distribution by State*
Alabama, 5,000 , 1.3%
Arkansas, 5,500 , 1.4%
Florida, 6,000 , 1.6%
Tennessee, 3,500 ,
0.9%
Louisiana
accounted for
48.6% of the
insured losses,
Texas 44.4%.
Mississippi, 7,000 ,
1.8%
Texas, 169,000 , 44.4%
Total # Claims
= 381,000
*As of February 8, 2006
Source: PCS division of ISO.
Louisiana, 185,000 ,
48.6%
Excludes
offshore energy
losses of $2-3B
Hurricane Wilma Loss
Distribution by Line ($ Millions)*
Commercial
Property & BI,
$2,000 , 21%
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.
Vehicle, $750 , 8%
Homeowners,
$6,600 , 71%
Hurricane Wilma Claim Count
Distribution by Line ($ Millions)*
Homeowners,
680,000 , 66%
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.
Commercial
Property & BI,
80,000 , 8%
Vehicle, 265,000 ,
26%
Insurance Information
Institute On-Line
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