PAMIC Annual Spring Conference 2018 "New Technologies to Help Insurers Better Understand & Climate Risks" March 8, 2018 Rajiv Krishnan

Private &Confidential 1 1 1 Extreme Weather Events are Growing.... The Challenge: How to Get “Climate Ready and Storm Safe”?

• Flooding, natural hazards and related damage losses are increasing exponentially

• In 2017, natural hazards in the US caused record losses of $306 billion.

2 Greater Storm Frequency and Severity

• Hurricanes Harvey and Irma revealed an astounding lack of resiliency; Brickell Ave. • Not enough property owners Miami, FL insured; • Property owners not properly educated about flood risks; • Property owners not incentivized to mitigate flood risks; • Federal, state and local Houston, TX governments under invest in resiliency infrastructure.

3 Less Than 20% of Harvey Victims Had Flood Insurance

Flood Insurance is a key component of personal and societal resiliency.

Can the Insurance Industry do a better job of helping insureds and societies cope? Source: USA Today

4 National Flood Insurance Program (NFIP) Needs Urgent Changes…

NFIP is characterized by: NFIP Debt Over Time (in billions) • Conflicting Mandates $25 • Large Deficits & Uncertain Funding Limits $20 • Low “Take-Up” by eligible participants • Subsidized rates – actuarially unsound $15 • Broad FEMA Risk Categories $10

Private Flood Insurers will become more $5 relevant in the coming years….BUT… they 0 need to cover risks & costs and earn profit 1980 1985 1990 1995 2000 2005 2010 2016 Source: American Academy of Actuaries – Flood Monograph, … technology can help. April 2017 5 FEMA Flood Maps Missed 75% Of Houston Flood Damage Claims Between 1999 And 2009

FEMA Flood Maps: • Backward looking in time; • Don’t include or ; • Don’t show the same inundation levels as NOAA Storm Surge Models; • Are fixed and don’t reflect seasonal changes; • Are not linked to any real-time Flooding along Interstate 10 in Houston as a result of Harvey https://www-forbes- conditions. com.cdn.ampproject.org/c/s/www.forbes.com/sites/trevornace/201 • Are usually out of date. 7/09/18/fema-flood-maps-missed-claims-harvey-houston/amp/

6 Why Aren’t FEMA Flood Maps Good Enough? Example: NOAA SLOSH Model Cat 1 Hurricane Surge Much Higher Than FEMA 100-Year Flood Height (Indicators for , Gulf and East Coasts of USA)

Category 1 Hurricane Storm Surge: 8.6’ above NAVD88 Vertical Datum

500-year Flood** = NAVD88 + 5.4’

100-year Flood** = NAVD88 + 4.6’

Ground Floor +8.8’ over Courtyard NAVD88 +7.8’ over 0’ above NAVD88 Vertical Datum NAVD88 SEAWALL +4.7’ over NAVD88

*NAVD88 Vertical Datum is the baseline elevation calculated Based on geodetic measurements around the world. 7 NOAA SLOSH Model Cat 3 Hurricane Much Higher Than FEMA 500-Year Flood Height Category 3 Hurricane Storm Surge: 17.7’ above NAVD88 Vertical Datum

500-year Flood** = NAVD88 + 5.4’

100-year Flood** = NAVD88 + 4.6’

Ground Floor +8.8’ over Courtyard NAVD88 +7.8’ over 0’ above NAVD88 Vertical Datum NAVD88 SEAWALL +4.7’ over NAVD88

*NAVD88 Vertical Datum is the baseline elevation calculated based on geodetic measurements around the world.

8 King Tides Overlap with Hurricane Season

• King Tide affected properties will fare worse during storms • King Tide affected properties may be less desirable from an underwriting perspective • What does King Tide Flooding mean for these homeowners? • Increased costs of repair • Loss of home values • Higher flood premiums? 9 New Technologies for a Rapidly Changing World

Insurers play an important role in helping global societies become more resilient… more and more each year.

In the past, performing property-specific, flood and climate risk assessments using engineers and consultants with analog methods has been a long and expensive process. 10 New Technologies for a Rapidly Changing World - 2

Now, big data, algorithmic and geographic information systems make this risk modeling and communication fast, accurate and affordable.

New technologies will help Insurers help their clients achieve greater resilience from climate change and greater sustainability and profitability in the turbulent years ahead. Insurers will have better tools to underwrite and place Flood & Climate Risks. 11 Big Data Used in Downscaled Flood Risk Assessments

Datasets used with algorithms: 1. LIDAR elevation/DEMs 2. Property boundary data 3. Tide gauge data (historical and real-time) 4. Riverine models (not just FEMA) 5. Sea Level Rise Models 6. Storm Surge Models (NOAA, etc. 7. Groundwater and Soils data 8. Erosion and land-subsidence

9. Real-time weather and IoT 12 New Technologies Supported by Latest Science... We Even Know When Will Occur in 2018

From Dr. Brian McNoldy, University of Miami; Coastal Risk Science Advisor 13 Greater Granularity is Needed For Underwriting Precision

• “Data at greater granularity is needed because the risks that underwriters are being asked to take are not always at the granularity needed for asset-level decisions.”*

• In same neighborhood, flooding will differentially impact structures with different freeboard. • Technology gets us to “asset level” *Lloyds “Future Cities: Building Infrastructure Resilience,” March 2017 14 Property-Specific Risk Evaluation for Flood Insurance Greater Granularity Leads to Greater Underwriting Precision… Benefits: AGENTS – Helps Flood Insurance Agents Sell More Flood Insurance (NFIP and Private) MGAs – Helps Wholesalers Underwrite Flood Insurance with Carriers and Reinsurers CARRIERS AND REINSURERS – Helps Underwriters by bringing all relevant, property-specific flood risk data and analytics together in a highly-visualized format

15 Rapid Screening for Flood Risks at the Property Level…

• New LIDAR-based technologies can rapidly “batch score” flood risks of dozens of individual properties; • Specific properties with significant flood risks can be identified for a “deeper dive” with parcel-level (1 square meter), visualized assessment reports; Fast, accurate and affordable.

16 Take a Deeper Dive with Flood Risk Assessments

Coastal Risk Model Actual Flooding 17 Heavy Rainfall Visuals for Better Risk Communication

Heavy rainfall flooding risk from low risk (green) to high (red).

Village of Key Biscayne NOAA Facility Virginia Key

18 Real-Time Alerting Systems will help keep your customers safer

South Florida June 07, 2017 What if this mall owner had advance notice of this extreme rainstorm event? 19 What if All Property Owners Had Visualized Flood Risk Assessments?

Base Flood Elev. = FEMA 100-year Flood Map Height.

Hurricane Storm All other elevations Surge Heights calculated by Coastal Risk’s modeling KING TIDE / SEA LEVEL RISE FLOODING 20 In Development: Flood Risk Information to Smartphones

An immersive Augmented Reality (AR) experience that ties coastal flood LIDAR data to modeled flood risks to various extreme weather and real- time flooding scenarios:

• View modeled flood levels with live AR projections on structures; • Uses Coastal Risk technology for property- specific flood risk assessments; • Connected to real-time, extreme weather alerting. 21 Modeling Flood Risks “Before and After” Potential Mitigation Investments

BEFORE AND AFTER FLOOD PROTECTION INVESTMENTS

22 Homeowner Risk Mitigation Reduces Insurance Payouts

Retrofit Examples: • Backflow preventers • Raise HVAC systems • Regrading land/driveway • Raise electrical outlets • Removable flood barriers • Elevate ground floor entrances Cost-effective adaptation measures will help Homeowners get Climate Ready

23 Commercial Buildings Must Also Risk Mitigate

Lloyds “Future Cities: Building infrastructure resilience”, March 2017 --- Smart Vent/ILC Insurers could offer: Flood Wall • Resilience services; • Build and operate contracts; • Facilities management; • Disaster recovery • Project financing

24 Goal - No Stranded People; No Stranded Assets

1. We don’t want our coastal areas to end up looking like this. 2. The time to take action is NOW! 3. All levels must employ the latest technologies available to provide actionable intelligence for cost- effective resiliency solutions. 4. Orchestration is key. 5. We’re all in this together!

25 For Further Information Contact:

Albert J. Slap, President and CEO [email protected]

Rajiv Krishnan, CFO [email protected]

Dr. Leonard Berry, Vice President and Co-Founder [email protected]

COASTAL RISK CONSULTING, LLC (O) 844-SEA-RISE (732-7473) [email protected]