Home Insurers Avoid Catastrophe Risk, Stockpile Cash

February 22nd, 2012 by admin | No Comments | Filed in News

The Consumer Federation of America is attacking home insurers for holding too much capital and avoiding business in risk-prone regions, charging that property-casualty companies have “hollowed out” catastrophe coverage.

In response, the head of the major industry trade group charged that CFA is dead wrong and is ignorant of all that happened in 2011 when it comes to storm coverage.

The back-and-forth is part of a long-running debate about what insurers should be required to cover, at what price and under what conditions.

The Consumer federation issued a report this week saying insurers in the property-casualty industry decreased their financial responsibility for hurricanes and other catastrophes, in part by by implementing deductibles as high as 5 percent of a home’s value, and by increasing premiums.

The CFA report also criticizes insurers for being over capitalized. The report suggests that even if all of the top ten catastrophic events in history — including Sept. 11, 2001, terrorist attacks, the Northridge, Calif., earthquake and eight top hurricanes — the total damage in 2010 dollars would be $ 162 billion. After paying that, the industry’s surplus would still be $ 418 billion, CFA contends.

Catastrophes remain a major problem for insurers and leave the companies under significant risk, said Robert P. Hartwig, an economist and president of the Insurance Information Institute, a trade group.

“Seemingly, the CFA is the only organization in the world that has been living under a rock over the past year,” Hartwig said. “To somehow assert that catastrophes are kind of a problem of the past for insurers flies in the face of all recent experience.”

Insurers paid about $ 35 billion in insured losses last year, one of the top five most expensive years ever.

In the wake of Tropical Storm Irene last year, there was some confusion about why higher “hurricane deductibles” were applied to damage on homes when Irene had been downgraded to a tropical storm before it barreled into Connecticut. Homeowners were facing out-of-pocket expenses that would have been thousands of dollars more than if their standard deductible applied.

Insurers were allowed under state insurance guidelines to write policies that would put in place higher deductibles for hurricanes — even up to 24 hours after they are downgraded to lesser storms. However, there’s a huge range in the way different insurers handle the so-called hurricane deductible, which left some homeowners protected from the higher out-of-pocket fee while others were not.

Most insurers waived the hurricane deductible in Connecticut after Irene. Connecticut Insurance Commissioner Thomas B. Leonardi changed the guidelines in September. Now, higher deductibles apply if the National Weather Service declares a hurricane and there are recorded sustained hurricane force winds – 74 miles per hour or more – anywhere in the state.

2012, The Hartford Courant

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Study links climate change to increased risk of storm surges

February 18th, 2012 by admin | No Comments | Filed in News

Studies of climate change and its impact on coastal communities usually focus on rising sea level. Now, scientists from MIT and Princeton University have developed a method to examine how multiple effects of climate change – including the combination of sea-level rise and stronger hurricanes — will affect storm surges that wash over sea walls and inundate communities, damaging buildings and infrastructure.

As a demonstration of the new technique, the scientists quantified how hurricane storm surges would affect New York City. They found that coupled with climate change, there would be a dramatic increase in the annual risk of so-called “100-year events” that have a 1 percent risk of occurring in any given year. As the climate changes, such powerful storms would have a 5 to 33 percent chance of happening in a given year in Manhattan, the scientists reported in an analysis published online today in the journal Nature Climate Change.

Kerry Emanuel, a professor of atmospheric sciences at MIT and an author of the paper, said that the method hasn’t been used to analyze Boston, but that because of Boston Harbor’s orientation and the characteristics of hurricanes that strike here, the city wasn’t particularly susceptible to hurricane storm surges. Narragansett Bay, on the other hand, is at greater risk.

“The technique could be applied anywhere,” Emanuel said. While it has become clear that climate change will have an impact on sea-level rise and hurricane intensity, Emanuel said that scientists have lacked tools to predict and quantify the combination of these effects.

The scientists used computer models, including four climate models and a hurricane model. They compared two time frames: storm activity and surges under present climate conditions from 1981 to 2000, and surges under the anticipated climate in 2081 to 2100.

The models predicted different rates of intense storms under the various climate scenarios, ranging from a 15 percent decrease in intense storms to a three-fold increase. Then, they used models to predict the storm surges expected in the various scenarios.

The scientists noted that even today, a “100-year storm” would cause a 6.5-foot storm surge, which would already rise above the sea wall protecting lower Manhattan. The sea level rise for New York City is predicted to be between 1.5 and 5 feet at the end of the century, and the researchers’ modeling predicted the increase in the storm surge level to be similar. Under the climate-change scenarios, the risk of such a “100-year storm” occurring or being exceeded would go from one percent a year to five percent a year or more.

“We lacked a good way of quantifying it, putting actual numbers on it … ” Emanuel said. “This is a way of catching actual numbers, like how much would it increase; what’s the range of possible outcomes, and how do you factor in sea level rise.”

2012 NY Times Co

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Study warns of fire danger in Western U.S.

February 17th, 2012 by admin | No Comments | Filed in News

EUGENE, Ore. (UPI) — The history of western U.S. wildfires suggests current conditions and fire-managements practices could mean a dangerous future for the region, a study says.

Researchers from the University of Oregon and other institutions said the American West has seen a recent increase in large wildfires due to droughts, the buildup of combustible fuel in forests, a spread of fire-prone species and increased tree mortality from insects and heat, all of which could contribute to “a perfect storm” for more fires.

While grazing and fire-suppression policies have managed to keep incidents of wildfires unusually low for most of the last century, the amounts of combustible fuel, temperatures and drought are all rising, a UO release said Wednesday.

“Consequently, a fire deficit now exists and has been growing throughout the 20th century, pushing fire regimes into disequilibrium with climate,” the researchers said.

“The last two centuries have seen dramatic changes in wildfire across the American West, with a peak in wildfires in the 1800s giving way to much less burning over the past 100 years,” lead author Jennifer R. Marlon at the University of Wisconsin, Madison, said.

Future policies must take into account how strongly climate and people affect the present-day landscapes and forests of the American West, researchers said.

“Policymakers and others need to re-evaluate how we think of the past century to allow us to adjust and prepare for the future,” UO researcher Patrick J. Jartlein said. “Recent catastrophic wildfires in the West are indicators of a fire deficit between actual levels of burning and that which we should expect given current and coming climate conditions. Policies of fire suppression that do not account for this unusual environmental situation are unsustainable.”

2012 United Press International, Inc. All Rights Reserved.

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Senators call for long-term flood insurance bill

February 16th, 2012 by admin | No Comments | Filed in News

A bipartisan group of 41 senators on Monday called on Senate Majority Leader Harry Reid (D-Nev.) and Minority Leader Mitch McConnell (R-Ky.) to pass a long-term flood insurance bill either this month or as soon as possible when the Senate returns from next week’s President’s Day break.

The National Flood Insurance Program (NFIP) expires at the end of May this year, and since 2008, the program has been extended only for short periods of time. The senators wrote that the program expired four times in 2010, resulting in a lapse of coverage.

“It has been estimated that those program lapses resulted in the delay or cancellation of more than 1,400 home closings per day, further damaging an already fragile housing market,” the senators wrote.

The letter, led by Sens. Jon Tester (D-Mont.) and David Vitter (R-La.), also notes that while the House approved a long-term flood insurance program last July, the Senate has yet to move on a bill approved by the Senate Banking Committee.

The Property Casualty Insurers Association of America welcomed the letter and said it shows the Senate is ready to follow the House’s lead.

“This strong, bipartisan support in the Senate underscores the sense of urgency for passing a long-term solution for the National Flood Insurance Program,” said Ben McKay, senior vice president of federal government relations for PCI. “Millions of American home and business owners rely on flood insurance in every state. This is not just a coastal concern.”

The House-passed bill would restructure the NFIP by phasing in actuarially sound flood insurance premiums, which supporters hope would would help erase the nearly $ 18 billion in debt that the program has racked up over the past several decades. In the final version passed by the House (which was part of the payroll tax extension bill), this change was expected to raise $ 4.9 billion over 10 years, allowing the program to start paying down this debt.

2012 Capitol Hill Publishing Corp., a subsidiary of News Communications, Inc.

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