Transcript Flood Insurance

HURRICANE SANDY RESPONSE AND AFTERMATH
- The New Reality of Natural Hazard Risk
Savita Goel, WDP & Associates
Heather Roiter Damiano, NYC Office of Emergency Management
David F Smith, EQECAT
Damian Wach, Prudential Mortgage Capital Company
April 29, 2014
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Page 1
LEARNING OBJECTIVES
• Assess how natural hazards and their threat to your organization
have changed.
• Lessons learned from the vantage point of key players in postevent response
• Incorporate your peers’ life-lesson adjustments into your own
natural disaster response program
April 29, 2014
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Page 2
OUTLINE
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April 29, 2014
Introduction to Speakers
Hurricane Sandy and CAT Modelling
Overview of NYC Infrastructure
Key Characteristics and Vulnerabilities
Aftermath of Hurricane Sandy
Challenges with Planning Post-Sandy
Risk Manager’s outlook
Discussion on Lessons Learned
Q&A
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Page 3
INTRODUCTIONS
Introduction to Speakers
- Savita Goel, WDP
- David Smith, EQECAT
- Heather Roiter, NYC OEM
- Damian Wach, Prudential
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Page 4
Superstorm Sandy - Highlights
• Cat 1 (80 mph 1-minute) at Atlantic City, NJ landfall
• Very broad windfield
~1000 mile diameter of tropical storm force winds
o Rmax significantly larger than 1938 storm
o ~$ 20 trillion in insurable assets in affected states
o
• Very low pressure (948 mb recorded at Atlantic City)
• Surge heights:
~14 feet in lower Manhattan: extreme
o ~9 feet at Atlantic City: not as exceptional but still very damaging in portions of the NJ
coast
o
• Rainfall amounts and rates ~ lower than Irene
o
Much less inland flooding
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Page 5
Superstorm Sandy
Superstorm Sandy Track
Historic Tracks
1903 was only event that
directly struck NJ coast (Cat 1,
transitioning)
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Modeled landfall frequencies (long term):
• Virginia – Maine ~ 1 / 8 years
• New York ~ 1 / 20 years
• New Jersey ~ 1 / 180 years
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Storm
Name
Intensity
(mph)
Rmax
(km)
Forward
Speed
(km/hr)
1938
98
95
65
Irene (NJ)
65
74
29
Sandy
80
110
37
Boston
New York
Philadelphia
Baltimore
Atlantic City
Washington
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Reported
•Atlantic City, NJ - 77 mph
•Cape May, NJ - 73 mph
•Clifton, NJ - 80 mph
•Coney Island, NY - 69
•Dennisville (Near Cape May) - 81 mph
•Greenwich, CT - 70 mph
•Islip Airport , NY- 90 mph
•JFK Airport , NY– 79 mph
•Montclair, NJ - 88 mph
•New Haven, CT - 85 mph
•Newark Airport, NJ - 78 mph
•Ocean City, NJ - 60 mph
•Sandy Hook, NJ - 87 mph (it is a buoy)
•Sandy Hook, NJ (onshore) - 81 mph
•Surf City (Ocean County), NJ - 89 mph
•Tompkinsville, NY – 90 mph
•White Plains Airport, NY – 72 mph
Boston
New York 70 85
8072
90
78
90 72
Philadelphia
87
Baltimore
Washington
60
73
89
77
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Page 9
Surge - Enhancing Factors
Factors enhancing Sandy’s Surge at Landfall
• Higher Winds
• Lower Pressure
• Faster Translation Speed
• Perpendicular Landfall
• Wider Storm - More Area Affected
• Shallow Offshore Slope
• Confining Coastline Geometry
• Peak Surge occurring at High Tide
• Higher Astronomical Tide (Full/New Moon)
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Surge – Coastline Geometry
NY Bight:
The “corner” where
NJ and NY meet at
approximately 90º.
Water can be
funneled into the
corner and pile up
with nowhere to go
but up.
Sandy’s track allowed
for a long duration of
winds directing water
into Raritan Bay and
NY Harbor.
L
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Battery Park NYC – Storm Tide
Resulting Storm Tide
Storm Surge
Normal Tide
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Superstorm Sandy – Loss Estimates
Losses By State
Others
16%
PA
20%
NJ
30%
NY
34%
Losses By Line of Business
Commercial
40%
Residential
60%
• The estimated economic loss for
this event is about $30 to $50
Billion
• Based on the event footprint and
EQECAT IED, the post-landfall
(Nov. 1, 2012) insured loss
estimate for Sandy is
approximately $10 to $20 Billion
(Later revised to $15-$20 Billion)
• Latest PCS: $18.75 Billion
• ~1-in-10 for U.S.
• ~1-in-70 for Northeast (VA-ME)
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Residential flood insurance take up rates in New York
in 2010 with Sandy storm surge estimates
Source: Resources for the Future, with data from FEMA
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Residential flood insurance take up rates in New
Jersey in 2010 with Sandy storm surge estimates
Source: Resources for the Future,
with data from FEMA
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Flood Damage
•
The National Flood Insurance Program (NFIP) reports that for
a 1-story building, the average cost to replace by flooding
height is:
1 foot - 22%
2 feet - 32%
6 feet - 58%
8 feet - 68%
•
NFIP reports that 25 to 30 percent of all paid losses were for
damage in areas not officially designated at the time of loss
as special flood hazard areas. (NFIP coverage is available
outside high-risk zones at a lower premium.)
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Page 16
Hurricane / Named Storm
Deductibles (1)
• Special hurricane deductibles had been introduced in 10 of
the states affected by this event (DE, MA, MD, ME, NC, NY, RI,
SC, VA), increasing the portion of hurricane damage that is the
responsibility of policy holders.
• Hurricane deductibles are separate thresholds that damage
must exceed before insurers will indemnify losses. Hurricane
deductibles of from 1% to 5% of the structure replacement
value are not uncommon. Some hurricane deductibles have
Cat 2 or 3 thresholds.
• Insurance Commissioners and Governors were quick to
instruct companies not to apply these deductibles.
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Hurricane / Named Storm
Deductibles (2)
• Sandy was downgraded to a post-tropical storm system just
before it made landfall in New Jersey.
• Sandy was not treated as a Hurricane for Insurance Purposes.
The Regulators did not overrule the Hurricane Deductible
elements in the contracts but rather chose to enforce the
Meteorological Assessment that Sandy had ceased to be a
Hurricane before landfall.
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Page 18
Wind vs. Flood - Policy Structures
Quantifying the risk for policies with distinct insurance
conditions for different sub-perils (e.g. wind limit and flood sublimit) requires:
• financial modeling that explicitly addresses such conditions
• exposure data representation that explicitly addresses such conditions
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NYC INFRASTRUCTURE OVERVIEW
Key Features of Infrastructure
- Coastal development
- Development in 100-yr flood plain
- Utilities infrastructure is
underground – Power, Water,
Wastewater
- Transportation - Underground
subways and the supporting
infrastructure
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INFRASTRUCTURE OVERVIEW – Coastal Development
Lower Manhattan in 1940’s
Lower Manhattan Now
In 1940
Population – 7.5 million
Buildings – Lot less than a million
In 2013 (within 100-year Flood Plain)
Population – ~5% of 8.2 million
Buildings – ~7% of a million
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INFRASTRUCTURE
Utilities – An Underground City
- Power lines: 70% of 130,000 miles of
transmission & distribution underground
- Steam: 105 miles underground pipelines
- Gas: 65% of heating and fuels 98% of
electricity production
- Water: 7000 miles of buried water mains
and pipes
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INFRASTRUCTURE
- Transformers vaults with access
from sidewalk
- Grating Covers
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INFRASTRUCTURE
Transportation
- Roadway: 6000 miles
- Inter-borough
connection: Bridges &
Tunnels
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INFRASTRUCTURE
Transportation
- Subways: Approx 5.3
million daily rides and
approx. 850,000 daily
commuter rides into
and within NYC
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BUILDINGS INFRASTRUCTURE
Key Features
- Buildings with basement (sometimes
multiple levels below grade)
- PoE of utilities located below grade
- Server rooms/ control room located in
basement
- Sidewalk vault with grating for
ventilation
- Emergency power:
- Fuel tanks located in basement
- Emergency Generators higher up
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CONSTRUCTION TYPES
- Brownstone
- High-rise
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KEY ATTRIBUTES
Older Buildings
- Smaller windows
- Heavy Exterior Walls Masonry or stone veneer
- More redundancies in design
- Ballast roof
- Rooftop equipment unanchored
- Water tank
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KEY VULNERABILITIES
Older Buildings
- Ballast roof
- Rooftop equipment
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KEY VULNERABILITIES
Older Buildings
- Rooftop equipment unanchored
- Water tank
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KEY ATTRIBUTES/ VULNERABILITIES
Newer Buildings
- Structural System – less
redundancies
- Large Size Windows
- Vulnerable Façade System
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DAMAGE FROM HURRICANE SANDY
Flooding
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DAMAGE FROM HURRICANE SANDY
Lower Manhattan in
Dark in Aftermath of
Hurricane Sandy
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DAMAGE FROM HURRICANE SANDY
Subway Tunnel
Flooded
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DAMAGE FROM HURRICANE SANDY
Buildings – High Rise
- Flooding
- Minimal to no structural
damage
- Disruption led cash flow
losses
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DAMAGE FROM HURRICANE SANDY
Buildings – Single Family
Homes
- Flooding
- Structural damage and/or
fallen tree
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Page 36
Upcoming Code Upgrades Following Lessons Learned
Flood Maps
- New FIRMs
- Buildings in 100-yr flood zone are mandated to have flood
protection plan in place
Building Codes
- Upgraded NYC Building Code in Oct. 2014
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Page 37
Challenges with Planning Post-Sandy
Heather Roiter Damiano
Director of Hazard Mitigation
NYC Office of Emergency Management
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Page 38
NYC Coastal Storm Plan
“Largest and most operational CSP in the country.”
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Page 39
The Story of Sandy
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Page 40
CONFIDENTIAL
Different Parts of the City Faced Different
Types of Flood Hazard
DOB Tagging by Flood Type and Geography
Surge and Wave Action
Atlantic Coast shorelines faced
inundation plus impact wave action
Surge and Wave Action
Stillwater Flooding
 Structures are primarily low-rise
residential
 Severe structural damage concentrated
in areas directly facing shoreline
Upper
Harbor
Stillwater Flooding
Upper Harbor and other areas to the
north generally experienced inundation
only
 Damage primarily to mechanical,
electrical, and telecommunication
systems and building contents
Atlantic Coast
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Page 41
CONFIDENTIAL
PlaNYC: A Stronger, More Resilient New York
Mayor Bloomberg released 6/11
Offers a roadmap to protect the city against
climate hazards and sea level rise
Sets City’s priorities and strategies for longterm resiliency
Community Recovery
•
Lower Manhattan ; Brooklyn/Queens Waterfront;
Southern Brooklyn; South Queens; Mid/South Staten
Island
Infrastructure and Built Environment
250 specific recommendations
Coastal protection
Buildings
Insurance
Utilities
Liquid Fuels
Community Preparedness
Healthcare Facilities
Telecom
Transportation
Parks
Wastewater and water
nyc.gov/resiliency
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CONFIDENTIAL
OEM’s Hurricane Evacuation Map
 Based on the SLOSH* model
 A worst-case scenario model that is
used for evacuation purposes
 A combination of hurricane modeling
and evacuation route analysis to
produce Zones 1 through 6.
 Recently updated (August 2013) to
provide more flexibility in evacuation
options and reduce confusion with
FEMA FIRMs
*SLOSH stands for Sea, Lake, and Overland Surges from Hurricanes
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Page 43
FEMA’s Flood Insurance Rate Maps (FIRMs)
FEMA’s flood maps are developed as part of the National Flood Insurance Program.
Key functions:
 Basis for understanding
current flood risk (coastal
and riverine)
 Inform building code
standards
 Determine flood
insurance requirements
NYC’s first FIRMs were issued in
1983
 FEMA currently updating
NYC’s maps
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Flood Insurance Rate Maps
FEMA’s FIRMs designate flood zones based on different types of hazards.
The Base Flood Elevation (BFE) is the height to which the flood waters are expected to rise.
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National Flood Insurance Program Reform
The NFIP has undergone significant regulatory change over the last 18 months.
July 2012: Biggert-Waters
Flood Insurance Reform Act
NFIP Challenges
• Pre-Sandy, NFIP was $18B
in debt to Treasury ($16B
from Katrina)
• Expected Sandy payouts
are $12-15B
• Subsidized rates do not
adequately reflect actual
flood risk
March 2014: Homeowner Flood
Insurance Affordability Act
• Prohibit premium subsidies
on new or lapsed policies
• Repeals trigger for new or
lapsed policies
• Phase out subsidies for all
policies
• Caps rate increases at 18%
annually (some exceptions)
• Require banks to enforce
purchase requirements more
vigorously
• Enables newly mapped
properties to purchase
preferred risk rate for 1 year
• Analyze affordability impacts
by April 2013
• Authorizes additional funds for
affordability study
• Provides refunds for certain
policies affected by BW-12
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Flood Insurance Rate Maps
Sandy demonstrated that New York was more vulnerable than previously thought.
FEMA 1983 FIRMs vs. Sandy Inundation Area
Damage outside 1983 100-year
floodplain:
•
> 1/3 of red- and yellowtagged buildings
•
~ 1/2 of impacted residential
units
•
> 1/2 of impacted buildings
Source: FEMA (MOTF 11/6 Hindcast surge extent)
FEMA 1983 FIRMs 100-year Floodplain
Sandy Inundation Area (outside the 100-year Floodplain)
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Page 47
CONFIDENTIAL
Flood Insurance Rate Maps
The most recent maps, called Preliminary FIRMs, were released in December 2013 and
show a floodplain that is 51% larger than previously.
FEMA 1983 FIRMs vs. Preliminary FIRMs
100-year Floodplain*
1983
FIRMs
2013
PFIRMs
Change
(%)
Residents
218,000
398,000
82%
Jobs
214,000
271,000
27%
Buildings
36,000
68,000
89%
1-4 Family
26,000
53,000
104%
Floor Area
(Sq Ft.)
377M
534M
42%
* Numbers are rounded for clarity
Source: FEMA
FEMA 1983 FIRMs 100-year Floodplain
FEMA 2013 Preliminary FIRMs 100-year Floodplain
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CONFIDENTIAL
Flood Insurance Rate Maps
Given the City’s projections on sea level rise, these floodplains will extend even further by
the 2020s and into the 2050s.
Projected floodplain for the 2020s and 2050s
100-year Floodplain*
2013
PFIRMs
2050s
Projected
Change
(%)
Residents
398,000
801,000
82%
Jobs
271,000
430,000
27%
Buildings
68,000
114,000
89%
1-4 Family
53,000
84,000
104%
534M
* Numbers
(Sq Ft.)are rounded for clarity
855M
42%
Floor Area
Source: FEMA
Source: FEMA; CUNY Institute for Sustainable
Cities
FEMA 2013 Preliminary FIRMs 100-year Floodplain
Projected 2020s 100-year Floodplain
Projected 2050s 100-year Floodplain
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CONFIDENTIAL
Affordability Challenges
The analysis shows that pre- and post-FIRM annual premium increases will be
significant due to the implementation of BW-12 and the FIRM update…
Annual Premiums
Scenario
Attached 1-2 Family
Red Hook, Brooklyn
Detached 1-2 Family
Gerritsen Beach, Brooklyn
Detached 1-2 Family
Midland Beach, Staten Island
Multistory
Current
New
NA
$4,100
$429
$8,045
$506
$2,365
Uninsured Pre-FIRM in 100-year floodplain
• Lowest floor relative to BFE: -5
• Has a basement
Newly mapped Pre-FIRM in 100-year floodplain
• Lowest floor relative to BFE (new): -9
• Has a basement
Existing Post-FIRM in 100-year floodplain
• Increase in BFE: 4
• Lowest floor relative to BFE (new): -1
Existing Pre-FIRM multistory
• Lowest floor relative to BFE (new): -9
• Has a basement
unknown
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CONFIDENTIAL
City Efforts and Next Steps: Flood Insurance
City is taking steps to reduce risk and increase understanding of its exposure.
1
Reduce risk
• City’s $19.5 Billion plan lays out 257 initiatives to strengthen coastal defenses, improve
buildings, protect infrastructure and make neighborhoods safer and more vibrant
2
Improve risk-based pricing:
• Neighborhood: Army Corps and FEMA do not always agree on flood protection benefits
• Household: 40% of City’s buildings cannot be elevated; exploring alternative mitigation
strategies
• “Pre-FIRM” construction: Need updated rate-setting methodology for old building stock
(focus of the Negatively-Rated Building Study being conducted by the National Academy)
3
Explore data collection options and launch affordability study
• Working with FEMA and Google on low-cost approaches to gathering elevation data
• Launching a 10-month study to assess affordability impacts and potential solutions
4
Inform the public:
• Launching public education campaign regarding risks, mitigation and flood coverage
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City Efforts and Next Steps: Codes and Standards

The City Council introduced over 20 bills
to address resiliency in 2013
 Flood-resistant construction for hospitals and
nursing homes
 Communicating risk and emergency plans
 Fuel storage in flood zone

Building Resiliency Task Force: 33
proposals
 Proposed changes to codes
 Best practices/guidelines for emergency planning
and response

A Stronger, More Resilient New York
recommends retroactive requirements for
existing large buildings and for hospitals
 Enhance protection of mechanical equipment
 Avoid long-term operational losses in a future flood
event
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Page 52
CONFIDENTIAL
Property Risk Management with Insurance
Property value may decrease
due to unforeseen financial
or physical loss (ie flooding).
Property Value
Owner
JV
Partners
Mezzanine
Lender
Junior Lenders
Catastrophic damage is of
particular concern to risk
managers due to severity of
loss – may restructure
ownership.
Property insurance is the
primary risk mitigate against
catastrophic loss of value.
Senior Lenders
Conceptual Real Estate Investment Structure
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Property Risk Management with Insurance
What type and how much
property insurance is needed?
Basic
Property
Coverage
• Need for catastrophic coverage
(flood, windstorm, earthquake)
determined by location and
property characteristics.
• National Flood Insurance
Program (NFIP) requires flood
coverage through mortgage
process.
• Need for flood coverage usually
determined by current Flood
Insurance Rate Maps (FIRMS).
• Windstorm coverage usually
included in property policy.
• Need for earthquake insurance
usually determined by Seismic
Zone or USGS’s PGA charts.
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Property Risk Management with Insurance
100%
• Windstorm insurance limits
usually equal insurable value
(IV); no analysis needed.
However, hurricane
classification may impact
coverage.
• Earthquake limits usually
much less than IV; determined
by seismic risk or probable
maximum loss (PML) analysis.
• Flood limits usually equal NFIP
limits.
Property Replacement Value
90%
80%
70%
60%
50%
40%
30%
20%
10%
• residential -$250k plus $100k for
contents
• commercial - $500k plus $500k
for contents.
0%
Property
Insurance
Limit
Windstorm
Sublimit
Earthquake Flood Sublimit
Sublimit
Type of Coverage
• Flood coverage rarely
determined by probable
maximum loss (PML) analysis.
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Property Risk Management with Insurance
Flood & Windstorm Risk Management in East Coast
• Many properties in US high risk flood areas (Special Flood Hazard
Areas – SFHAs) rely exclusively on NFIP flood insurance.
• In many cases, the NFIP limits of $250k for residential and $500k for
commercial may be insufficient to cover probable maximum loss.
• In NYC, property characteristics such as location of mechanical
equipment, electrical transformer, back-up power generators, etc.
historically not considered in determining flood limits.
• Current Flood Insurance Rate Maps (FIRMS) or pending maps should
be relied upon to determine flood risk.
• Property management’s ability to manage flood or windstorm
restoration also critical in minimizing loss (ie - shortage of restoration
contractors, generators, materials after Sandy).
• Best practice: engage a team and develop a detailed risk management
plan before the crisis.
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