Lessons from Hurricane Sandy

Source: NASA

Mark Bove, CPCU, ARe Senior Research Meteorologist

IMUA Annual Meeting 21 May 2013 Agenda

• Hurricane Sandy • Storm History • Why did Sandy become a “Superstorm”? • Storm Impacts • Wind • Precipitation • Storm Surge • Underwriting & Catastrophe Modeling Lessons • Application of Hurricane Deductibles • Accuracy of Surge Modeling • Flood Exposure Data • Location of Contents • Marine Exposures

Hurricane Sandy

Source: NASA Storm History: Hurricane Sandy

• October 22: Tropical Depression #18 is classified in the south-central

Caribbean Sea. The

depression is upgraded later NASA

that day, becoming Tropical Source: Storm Sandy, as it moved slowly northward.

• October 24: Sandy begins a period of rapid intensification. Becomes Cat 1 hurricane

before landfall in eastern NASA Jamaica, then Cat 3 before landfall over eastern Cuba. Source: Storm History: Hurricane Sandy

• October 25-26: Sandy exits Cuba, then passes over the eastern Bahamas. Weakens

back into Tropical Storm due

to wind shear but storm size NASA

increases dramatically. Source: • October 27-28: Sandy moves northeastward, hundreds of miles off the Carolina coast. Sandy regains hurricane

intensity.

NASA Source: Storm History: Hurricane Sandy

• October 29: Sandy turns northward, then northwest. Reaches a secondary maximum intensity of 85 kts (100 mph). Forward motion also accelerates as storm moves towards the coast. Wind field continues to expand.

• Once over colder water, Sandy starts to lose tropical characteristics, becoming

“post-tropical” just before

landfall near Atlantic City, NJ. NASA Source: Title of presentation and name of speaker 6/13/2013Source: NOAA7 Title of presentation and name of speaker 6/13/2013 8 Hurricanes off the New Jersey Coastline, 1851 - 2011

Sandy’s Path

Title of presentation and name of speaker 6/13/2013 9 Source: NOAA Why did Sandy Become a “Superstorm”?

• At landfall in New Jersey, Sandy possess some unusual path, size, and hazard characteristics, leading the storm to be dubbed a “Superstorm” by the media, including:

• West-northwestward motion into New Jersey coast

• Very large wind field

• Extreme storm surge in New York & New Jersey

• The term “Superstorm” is a creation of the media. There is no formal meteorological meaning for this term.

• In meteorological terms, Hurricane Sandy completed a process known as Extratropical Transition just before landfall. This resulted in the National Hurricane Center classifying Sandy as “Post-Tropical”, which means Sandy had become an extratropical cyclone.

Understanding Extratropical Transition: Types of Large-Scale Storms

Tropical Cyclones • Low pressure center warmer than surroundings (Warm-Core Low). • Develop in air masses of relatively constant temperature and humidity. • Symmetrical shape. • Weak upper-level winds aloft.

NASA Source:

Extratropical Cyclones • Low pressure center colder than surroundings (Cold-Core Low). • Develop in areas of temperature gradients between differing air masses. • Asymmetrical Shape NASA • Strong upper-level winds critical in

Source: development and intensification. Understanding Extratropical Transition

. Process of tropical cyclone becoming an extratropical (frontal) cyclone. Usually induced when hurricanes interact with colder, drier air, jet

streams, or extratropical weather systems.

NASA

Source: Source: Floyd as Tropical Low Floyd as Transitioning Low Title of presentation and name of speaker 6/13/2013 13 Source: NOAA/NCEP Title of presentation and name of speaker 6/13/2013 14 Title of presentation and name of speaker 6/13/2013 15 Source: NASA Sea Surface Temperatures, Late October 2012

Title of presentation and name of speaker 6/13/2013 16 Source: NOAA Source: NOAA Why did Sandy turn West?

Title of presentation and name of speaker 6/13/2013 18 Source: NOAA Why did Sandy have such a large windfield? Why was the storm surge so extreme?

Source: NOAA Sandy Impacts

Source: Munich Re Sandy Impacts - Overview

• Second largest insured loss in the United States due to a tropical cyclone in terms of original dollar loss, $30 bn. (First: Katrina (2005), $60 bn)

• Estimated economic losses of $65 bn.

• Most damaging tropical cyclone in the Northeastern United States since the 1938 Great New England Hurricane.

• Wind damage observed across 15 states & Canadian Maritime provinces

• Record storm surges along New York and New Jersey Coastlines causing extensive damage.

• Power outages widespread across the region due to both wind and surge.

• Major infrastructure damage in New York City. Hurricane Sandy Maximum 1-Minute Sustained Winds & Gusts

Title of presentation and name of speaker 6/13/2013 22 Source: NOAA Examples of Sandy Wind Damage

Title of presentation and name of speaker 6/13/2013 23 Source: Munich Re Examples of Sandy Wind Damage

Title of presentation and name of speaker 6/13/2013 24 Source: Munich Re Hurricane Sandy Rainfall Totals

Title of presentation and name of speaker 6/13/2013 25 Source: NOAA Hurricane Sandy Snowfall Totals

Title of presentation and name of speaker 6/13/2013 26 Source: NOAA Hurricane Sandy Storm Surge (Height above ground level)

Title of presentation and name of speaker 6/13/2013 27 Source: NOAA Hurricane Sandy Storm Surge Damage, Mantoloking, NJ

Source: NOAA Hurricane Sandy Storm Surge Damage

Title of presentation and name of speaker 6/13/2013 29 Hurricane Sandy Storm Surge Damage

Title of presentation and name of speaker 6/13/2013 30 Source: Munich Re Hurricane Sandy Storm Surge Damage

Title of presentation and name of speaker 6/13/2013 31 Source: Munich Re Underwriting and Cat Modeling Lessons From Sandy

Source: Carl Hedde / Used with Permission Lessons from Sandy: Hurricane Deductibles

• Designed to reduce insurance costs for consumers by requiring a higher deductible for rare, but extreme loss events, like hurricanes.

• Each state can independently define how a hurricane deductible is triggered in their state.

• “Named Storm” – Any storm named by the National Hurricane Center

• Hurricane – Any storm classified as a hurricane at landfall by the National Hurricane Center

• Variations: Only Cat 2 & Above, etc.

• Storm must make direct landfall over the state.

Lessons from Sandy: Hurricane Deductibles

Source: State of New Jersey Lessons from Sandy: Hurricane Deductibles

• For two consecutive years, borderline-hurricane events have made landfall in the northeast, but hurricane deductibles haven’t been allowed to be applied.

• This means that the modeling assumption of using a hurricane deductible for weak Cat 1 hurricanes or transitioning storms may be incorrect.

• This practice artificially reduces the loss costs for portfolios because the fire deductible isn’t used in the modeling.

• Currently, some models typically only accept one deductible type per peril.

• Do we ask for wind and fire deductibles in data submissions?

• For which storms in the event set should the fire deductible be used with?

Lessons from Sandy: Storm Surge Modeling

Surge is only partially dependent on storm intensity. Do the models reflect that large surges can be generated by weaker hurricanes or storms undergoing transition?

Flooded areas in New York by hurricane category (SSHS)

Category 1 Category 2 Category 3 Category 4 Source: Munich Re – Severe weather in North America, 2012 Lessons from Sandy: Flood Exposure Data

• There are no statistical inland flood models available for the United States (coastal surge modeling exists), largely due to the fact that most flood risks in the US are federally insured via the NFIP.

• Historically, there has been low demand by model clients to develop these models.

• Developing an inland flood model would be a huge project, taking modeling companies years to develop.

• As a result, the capturing of data for privately-insured flood risks in the industry significantly lags data capture for other perils.

• Current modeling of flood risks for surge, when known, is also limited by ability of models to handle flood sublimits and accurately determine amount of flood damage that “leaks” into the wind policy claim.

Lessons from Sandy: Location of Contents

• The location of contents within an insured location is critical when assessing flood loss potential, particularly for commercial and industrial risks.

• Examples:

• Hospitals (MRIs, CAT Scan Machines, Radiology equipment)

• Office Buildings (Electrical and IT equipment, etc.)

• Specialty businesses (Art Galleries)

• Models tend to spread out contents value over the number of stories within a building. This could lead to an underestimation of the amount of contents at risk to flood losses.

Lessons from Sandy: Impact to Marine Industry

• Inland/Ocean Accumulation Risks

• Ports and stevedore operations exposed to significant storm surge

• Chelsea art district flood and storm surge exposure

• Are cargo/transit policy occurrence limits adequate?

• Warehouses

• Flood maps are inaccurate – location and aggregation issues

• How cargo is stored matters

• Yachts & Marinas

• Haul-outs caused more damage than proper mooring in place

• Pilings too short

• Correct insurance to value - cost to rebuild to code may be significant

Source: NASA

THANK YOU! ANY QUESTIONS?

Mark Bove [email protected] Source: NASA

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