Hurricanes, Floods, Losses O’ My!

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Hurricane & Flood Losses

In the insurance world, a catastrophe refers to an event in which insurers anticipate claims of at least $25 million, and where thresholds are met on the number of claimants and insurers against whom claims are filed. The statistics below on losses from hurricanes and flooding reveal many catastrophic events within the last few years.

Hurricanes

Nearly 40 percent of catastrophic events come from hurricanes and tropical storms. These events bring devastation in the form of high winds, storm surges and torrential rains. While wind certainly contributes to damages, flooding can inflict an extremely heavy and overwhelming toll on property holders and communities. The flooding aspect of tropical systems place many communities well inland at risk of being part of the disaster.

The 2018 Hurricane season carried an estimated price tag, in terms of losses, of $33 billion. Between 1980 and 2018, hurricanes and other tropical systems have inflicted damage totaling approximately $919.7 billion, adjusted for the Consumer Price Index. This translates to an average of $21.9 billion in damages per tropical cyclone striking the United States during that period.

From 1900 to 2017, the United States experienced 36 hurricanes with costs of at least $1 billion. Four of these storms struck in 2016 and 2017 — Matthew (2016) and Harvey, Irma and Maria (2017). Harvey ($125 billion), Maria ($90 billion) and Irma ($50 billion) ranked, as of the end of the 2017 Hurricane season, among the top five costliest hurricanes. Katrina (2005), at $161 billion, remains the most expensive in United States History. Sandy, third-ranked on the list, struck in 2012 and left damages of approximately $71 billion.

In 2018, two hurricanes (Florence and Michael) each inflicted billions in damages. Florence-related losses covered by insurance policies (not counting those covered by the National Flood Insurance Program) ranged between an estimated $2 billion and $5.5 billion. The estimated total damages from Florence reached $17 billion. For Matthew, insured losses carried estimates of $6 billion to $8 billion, with total losses climbing to nearly $11 billion.

Flooding

In addition to tropical systems, heavy rain events from thunderstorms and stalled or slow-moving unstable weather patterns create flooding damage. On average, flooding causes $8 billion annually. From 2000 to 2017, catastrophes involving flooding have resulted in damages north of $750 billion. In 2017, NFIP paid damages of over $8.7 billion for flooding losses. This more than doubled the nearly $3.7 billion in 2016.

Think you’re immune from flooding or the costs from it? According to the Federal Emergency Management Administration, the vast majority of counties and parishes in the United States (98%) face flooding events. More than one in five claims for flooding damage originate from places not considered at high risk for flooding. These numbers bear witness to the reality that not just coastal counties or those located along rivers experience significant flooding problems.

It does not take a catastrophe to accumulate significant damages for households. For the average home, considered by FEMA to be 2,500 square feet and one story, merely an inch of flooding in the structure translates to a potential loss of $26,807 to real and personal property. With four inches of water in the interior, that loss exposure climbs to $103,355.

Why You Need to Examine Your Property Coverage?

Standard homeowner’s and property casualty insurance policies do not cover damage from flooding. Those who do not live or own property in floodplains, and, thus, are not required by the federal government or normally by their lenders to have flood insurance, may not believe they need it. The realization that homeowner’s coverage does not avail for flooding damage, whether catastrophic or relatively minor, does not hit until the owner files the claim.

Congress created NFIP in 1968 out of concerns that standard insurance did not cover floods, and the costs of disaster relief and restoration from these events fell ultimately to taxpayers. Policies issued under NFIP afford coverage of $250,000 on the home itself and $100,000 on the contents in the home. Premiums for NFIP coverage average $700 annually. To access this coverage, your community must enact and enforce ordinances for protection and management of floodplain areas.

If you cannot obtain coverage from NFIP, usually because your property does not lie in a community with the necessary ordinance, you may find private companies to cover flooding. This insurance may come as a separate policy or an endorsement (or extra) to a homeowner’s policy.

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