Arkansas Flood Damages

For the past two weeks areas of Arkansas have been continually dealing with flooding. Unfortunately forecasts of rain have prevented any receding of flood waters, and in some cases have increased water levels.

FEMA administrator R. David Paulison believes it is too soon to evaluate damages; “Once the water dies down, we can start seeing what kind of infrastructure’s been damaged, whether it’s the roads or the sewage system, water system, police station, fire station. And we don’t know that yet.”

High waters have closed many roads across multiple counties. Still, recent rains have led to more predictions of flooding. In Black Rock, the Black River, with a flood stage of 14 feet, was expected to reach 25 feet on Tuesday. In Patterson, the Cache River, where the flood stage is 8 feet, was expected to reach 11 feet on Wednesday.

Department of Workforce Services has said that residents in the following counties may be eligible for disaster-unemployment assistance: Baxter, Benton, Independence, Jackson, Lawrence, Logan, Madison, Marion, Randolph, Stone, and Woodruff.

Central U.S. Faces Storms and Flooding

Heavy rain, which began on Monday March 17th, has cancelled flights, forced evacuations, and killed two people in the central United States. The National Weather Service warned of floods and flash floods from Texas to Ohio, and tornadoes in Texas, Louisiana, and Arkansas.

In Missouri, where forecasters predicted 10 or more inches of rain by Wednesday, the Governor (Matt Blunt) activated the National Guard to help with hundreds of closed roads. In Piedmont, one third of the homes were evacuated after a creek overflow caused 2 to 3 foot floods in the town. Other towns such as Winona and Ellington also had many homes and businesses evacuated.

These floods were the cause of two deaths in Missouri. In Ellington, the body of an 81 year old man was found in the water. A Department of Transportation worker was killed as he was helping a flooded area and his dump truck was hit by a tractor-trailer rig; He was 21 years old.

American Airlines cancelled 700 flights at Dallas-Fort Worth International Airport because of the weather, as winds were near 70 miles per hour. The west tower at the airport was evacuated after a funnel cloud (which becomes a tornado if it touches the ground) was reported. Ken Capps, an airport spokesman, said, “This is one of the most vicious thunderstorms DFW has seen in quite some time, especially its ongoing intensity. Add in two snow storms in the past two weeks, and this has been one of the most unusual early spring weather patterns in years.”

Stolen Paintings Recovered in New England

In 1976 Mae Persky was robbed of three paintings worth about $45,000. These paintings were taken from her home in Shrewsbury, Massachusetts after her home was aggressively invaded.

Now the paintings are worth $1 million, and are in custody of the FBI, after they turned up in the home of Patrick Conley, a prominent lawyer and developer from Rhode Island.

United States Attorney Robert Clark Corrente has filed a civil action in federal court to have these paintings returned to their rightful owner. Conley and his wife are hoping to maintain ownership, as are the heirs of Mae Persky, and the insurer who paid Ms. Persky as a result of the theft.

Conley said the paintings came into his possession through his brother in exchange for a $22,000 loan. The three oil paintings involved were completed by Child Hassam, William Hamilton, and Gustave Courbet.

Conley discovered these paintings were real after bringing them to a Newport, R.I. art dealer. Although the dealer confirmed they were authentic, he also told Conley they were on the Art Loss Register as stolen art, and he would be contacting the FBI. The Providence Journal reported that Conley said, “I don’t think my brother realized they were real either. If he thought they were real, he’s not going to leave a million dollars in my possession.”

Coastal Hurricane Damages

A new study, directed towards civil engineers, concluded that the increased cost of hurricane damages is not the result of global warming. Chris Landsea, a NOAA researcher and one of the authors of this study, said the following: “There is nothing in the U.S. hurricane damage record that indicates global warming has caused a significant increase in destruction along our coasts.”

Using hurricane damage information from 1900 to 2005, they concluded that for the last 106 years hurricanes have generally caused the same amount of damage. An example they cited was a hurricane that hit Miami in 1926. They projected that had this same hurricane hit in 1995 it would have cost $72 billion, and by 2005 it could be up to $157 billion in damage. If it occurred today, it would surpass Hurricane Katrina’s losses (which totaled $81 billion). The reasoning behind this is inflation, as well as all of the building that has occurred along the coast.

After research, some risk analysts believe that damages may double every decade because of inflation, building, and construction costs. Landsea also said: “Unless action is taken to address the growing concentration of people and property in coastal hurricane areas, the damage will increase by a great deal as more people and infrastructure inhabit these coastal areas.”

Homes Damaged in Nevada Earthquake

At 6:16 on Thursday morning there was a magnitude 6.0 earthquake in Nevada. There have been no reports of death or serious injuries; however hundreds of homes were destroyed.

The historic district of Wells, Nevada had damage to approximately 20 to 25 buildings, including the high school which is temporarily closed. The earthquake’s epicenter was about 6 to 12 miles east of Wells. Because of its high magnitude it could be felt from Northern Idaho and Utah all the way to Southern California. There were as many as 30 aftershocks reported.

A state of emergency was declared in Wells by county commissioners, resulting in a town closure to everyone except the 1,600 residents.

A state spokesman by the name of Tom Turk reported that almost all of the towns 700 residential structures had at least minor damage. The American Red Cross set up a temporary shelter for families who have been displaced. By Thursday night there were 40 families at the shelter.

According to Tony Lowry, a Utah State University assistant professor of geophysics, this earthquake was unusual. “In that part of Nevada, I don’t think we’ve seen any like that in the last 150 years or so… It’s not one of the places we would’ve looked or expected.”

Governor Jim Gibbons said “I think we were just blessed that Mother Nature struck when it did… rather than some time later on when the people would be out and about and the sidewalks might have had more people on them when these structures came down.”

Hurricane Katrina’s Flood Damages to Xavier University

The Supreme Court has decided to reject appeals from Hurricane Katrina victims who hoped to have their insurance companies pay for damages. This decision, made on Tuesday February 19th, rejected the appeals of Xavier University and 68 individuals and businesses who wanted to allow lawsuits against their insurance companies to commence.

Xavier and others were hoping that since these floods were the result of a man-made failure rather than solely a natural disaster, they would be covered. Collapsed levees in New Orleans were the man-made failure on which these insureds are placing blame. The policies of these insureds did not cover damage caused by flooding, as was determined in August by the 5th U.S. Circuit Court of Appeals. They ruled that in their policies, flooding is not limited to natural events. This conclusion meant that Xavier and the 68 individuals were not at liberty to file lawsuits against their insurance companies.

In another related case, a Louisiana appeals court stated that in some policies, the language of water damage exclusions was ambiguous. On February 26th the Louisiana Supreme Court will be hearing arguments in this particular case.

Controversy Over FEMA’s Calculation of Damages in Illinois

This past January heavy rainfall and melting snow resulted in major flooding throughout two counties in east-central Illinois. Hundreds of families were forced to leave their homes because of these conditions. As the Vermilion River flooded over its banks, it became necessary for over 400 homes to be evacuated.

Since damages from these floods were extensive Governor Rod Blagojevich declared these as disaster areas. On February 6th, the Federal Emergency Management Agency (FEMA) denied declaring these two counties as disaster areas. The following was written in a letter from FEMA to Blagojevich: “Based on our review of all of the information available, it has been determined that the damaged was not of such severity and magnitude as to be beyond the capabilities of the sate and affected local governments.”

After receiving this letter, county leaders and the Illinois Emergency Management Agency had a conference call with federal officials. Unfortunately, in FEMA’s research, they calculated an inaccurate number of homes damaged. Although FEMA reported 246 damaged homes in Iroquois County, there were another 317 homes that had damage. They left out another 40 homes in Livingston County, reporting only 236 homes. Scott McCoy, the mayor of Pontiac, Illinois was “not sure how this could be so off. Either IEMA or FEMA didn’t complete their job correctly, or somebody simply doesn’t know how to add.”

McCoy has claimed that the federal officials which surveyed the damage were lacking in staff and were driven out by bad weather, thus cutting their survey time short. County officials met to discuss filing an appeal from FEMA. They have until March to submit a new application to state officials who in turn submit the information to FEMA. Had these counties been approved by FEMA, the government would provide assistance for people whose homes were damaged, including cash grants for temporary housing, home repairs and replacements.

Wildfires in the Carolinas and Virginia

Virginia’s Governor, Tim Kaine, declared a state of emergency after at least 100 brush fires began on Sunday. About half of the 95 counties in Virginia reported “significant” wildfires. In Bedford County, at least 10 wildfires destroyed approximately 400 to 500 acres. There are about 100 National Guard troops and fire aircrafts to fight the fires. These fires have damaged at least three homes already.

There were over 90 wildfires reported throughout South Carolina, although many were considered minor. The worst was in Horry County and covered 250 acres. Ten homes have been destroyed in South Carolina.

These fires spread quickly and easily due to a regional drought, and 50 to 60 mph winds. Click here to see how the Insurers World SOS team has helped similarly stricken areas.

Negative Temperatures and Winter Storms from the Northern Plains to the Northeast

Winter weather caused many delays and accidents from the northern Plains to the Northeast this weekend. In Wisconsin the temperatures dipped way below zero; in Madison it was -4 degrees Fahrenheit, with a wind chill of -25, in Green Bay it was -6 degrees Fahrenheit with a wind chill of -32. Temperatures at Devils Lake, North Dakota -20 degrees Fahrenheit with a wind chill of -38 at noon on Sunday. The “Icebox of the Nation,” International Falls, Minnesota, was only -15 degrees Fahrenheit, with a -40 wind chill.

In Pennsylvania, the weather caused a 68 vehicle pileup. This pileup left 35 people injured, and killed one woman after her car was wedged underneath a tractor-trailer. People who left their cars and climbed down an embankment to avoid being hit were rescued by firefighters using rope. Many cars were left disabled, and at least 24 people were taken to shelters. Lt. Jason Zoshak of Hazleton Township Fire and Rescue said: “They had a heavy snow squall going through the area, zero visibility, high winds. There were vehicles everywhere.”

For information on how to stay safe during storms and disasters, click here.

Tornadoes Devastate the South

Tuesday night and Wednesday morning tornadoes whipped through Arkansas, Kentucky, Tennessee, Alabama, and Mississippi. These tornadoes killed at least 55 people and left over 100 others injured.

The death toll in Arkansas reached 13. Jim Ed Gibson, the Pope County Judge, reported widespread damage throughout the county. A major interstate was briefly closed due to overturned trucks and vehicles. There are about 30 National Guardsmen helping this area today.

A tornado in Northern Alabama caused a 10-mile “path of destruction” which killed 4 people, and destroyed numerous homes.

In Kentucky, the death total is now 7. Muhlenberg County has declared a state of emergency, and currently has Kentucky National Guard troops for assistance.

Tornadoes in Tennessee resulted in approximately 50 people being stuck in rubble at the Jackson Oaks Retirement Home. The death toll in Tennessee is now 31.

Union University, located in Jackson, Tennessee (with a student body of 3,300) was hit extremely hard. The women’s dorms and two academic buildings were destroyed. Because of warning, students were able to get to shelters, but at one point 13 were trapped in a damaged dorm. Union University President, David Dockery said, “It looks like a war zone… Cars and trucks thrown from one side of the campus to the other.” Classes are cancelled for two weeks.

A large fire in Hartsville, Tennessee had 400’ to 500’ high flames, according to Donnie Smith, a Tennessee Emergency Management spokesman. Officials believe this fire began when a tornado hit a Columbia Gulf Transmission Company compressor station. As natural gas is piped through this station to get to the mid-Atlantic and northeastern states, this station boosts the pressure. This natural gas fire was put out early Wednesday morning.

The Earth’s Climate and Its Affect on the Insurance Industry

The American Geophysical Union (AGU), which is the world’s largest scientific society of Earth and space scientists, has released a new statement about climate change. This bulletin starts with: “The Earth’s climate is now clearly out of balance and is warming.”

Proof of our changing climate can be found in the global average surface temperature, which has increased about 0.6 degrees Celsius over 50 years (1956-2006). These, and other changes (including the sea level, precipitation, season length), can be explained by increased greenhouse gases and aerosols. These changes, that have become evident in most oceans and on every continent except Antarctica, are the result of human activities.

To read the full article from the AGU, click here.

As our climate changes, the amount of natural disasters has also increased. Between 2006 and 2007 the amount of worldwide catastrophes increased by just under 12%. However, the losses sustained from disasters in 2006 doubled in 2007 from $15 billion to $30 billion.

Dr. Torsten Jeworrek, a member of the Munich Re Group said the following: “The trend in respect of weather extremes shows that climate change is already taking effect and that more such extremes are to be expected in the future. We should not be misled by the absence of mega catastrophes in 2007… All the facts indicate that losses caused by weather-related natural catastrophes will continue to rise.”

Snowstorms throughout the Western States

Heavy snowstorms have hit areas from Washington to Arizona after a storm system from California combined with a storm from the Gulf of Alaska. This past weekend, the storm system brought the risk of mudslides, causing many roadway closures and delays through California and surrounding states. Constant rainstorms have made it difficult for the hillsides to dry out safely, thus increasing the risk of landslides. The storm system brought 5.3 inches of rain to downtown LA in the past 8 days, making the seasonal total 10 inches (3.5 inches above the historical average for this time of year).

Once these two storms converged, they caused 20 inches of snow around Coeur d’Alene, Idaho; 13.7 inches in Spokane, Washington; and 30 inches and 100mph wind gusts in the San Juan Mountains of Colorado.

All of this snow build-up caused roofs of businesses to collapse in northern Idaho. Avalanches also damaged four houses and a garage, spurring the evacuation of 71 homes northwest of Ketchum, Idaho. The Navajo Nation declared an emergency due to flooding as heavy snow melted on its reservation across parts of Arizona, Utah, and New Mexico.

Weekend Storms on the West Coast

This past weekend, storms caused many roadway closures and delays through California and surrounding states. The reason for these closings was the risk of mudslides. Experts have said that the same areas of LA, Orange, and San Diego counties that were involved in the wildfires last fall are now at risk for landslides. Constant rainstorms have made it difficult for the hillsides to dry out safely.

People were left without power across the west coast. Last night, 7,000 customers lost power in southern California. Pacific Gas and Electric said that 2,700 Bay Area customers were without power from preceding storms. These storms left over a foot of snow in areas of Washington and Idaho, leaving approximately 4,000 customers without power in those states.

This amount of rain has caused the Santa Anita race track to cancel its horse races for the sixth day this month. In the past 7 days LA has recorded 5.3 inches of rain. The seasonal total is now 10 inches, while the historical average for this time of year is 6.5 inches.

Fire Leaves Families Homeless, SOS Sent to Help Insureds

A Sunday night fire at Indian Village condominiums in Grand Rapids, Michigan has left 100 people without their homes. Fortunately, no one was seriously hurt during the fire. Firefighters did rescue at least three people during an all night battle with the flames.

Firefighters believe that the building is a total loss. Brian Goss, the Grand Rapids Fire Department Battalion Chief, said: “It’s an older building, has a common attic area which gave a chase for fire to move through very rapidly undetected at first. The fire got a big head start on us before the initial call because of it being concealed in the attic area.” After spreading through the attic area, the roof collapsed onto the third floor condos. The first and second floors were destroyed by both the fire and the water used to control the flames.

Any displaced residents may contact the Red Cross for food and clothing vouchers or replacement medicines and glasses.

Our large loss scoping service, SOS, will be on-site documenting the losses in these 20 condos. Insurers World offers continued support to those who are stricken with disasters such as this. We understand that after any personal devastation, the road to repair should be as simple as possible.

New Disaster Response and Recovery Plan from the Department of Homeland Security

“So it’s a whole new era, a whole new culture, in how FEMA,
how Department of Homeland Security is going to respond to disasters.
It is going to be a partnership.”– R. David Paulison, FEMA Administrator

A comprehensive plan, called the National Response Framework (NRF), has been released by the Department of Homeland Security. When creating this plan, a total of 5,700 comments from participants were taken into consideration. This plan was created to be more user-friendly and less bureaucratic, with the hope that future disaster responses will be more like that of the California Wildfires than Hurricane Katrina.

The Homeland Security Secretary, Michael Chertoff, said: “The National Response Framework is an essential tool for emergency managers at all levels… It helps define the roles, responsibilities, and relationships critical to effective emergency planning, preparedness and response to any emergency or disaster.”

This plan was created for senior elected and appointed leaders, including federal department and agency heads, state governors, mayors, tribal leaders, city managers, and the private sector.

Training courses will be on the FEMA website starting February 5th 2008. A total of 24 courses will be online by April 11th 2008. FEMA Administrator R. David Paulison said that by June 1st he wants: “all the federal family trained, all the federal responders, and as many first responders and emergency managers out there, ready to go to understand how we’re going to operate in this country before hurricane season.”

There are five core principles that the NRF was based on:

• Engaged partnerships at all levels of government and across society, public and private sector.
• Tiered response whereby local communities, tribes, and states have the primary responsibility for the safety and security of their citizens.
• No two disasters are alike, meaning all capabilities have to be flexible and adaptable to meet the needs of every unique type of event.
• Unity of effort, meaning a clear understanding of the roles and responsibilities among all those involved.
• The principle that the plan be an always active, forward-leaning posture that emphasizes readiness to act.

2007 Catastrophes May Cost Insurers $6.5 Billion

The ISO insurance trade group has estimated that $6.5 billion in property and casualty losses were caused by natural disasters in 2007. This number is based on the damages of 23 natural disasters and fires. Of these 23 disasters, 17 were weather events that may have included: wind, hail, tornadoes, and flooding. There were also 5 winter storms and 1 fire. As a result of these natural disasters, 1.18 million property and casualty claims were filed.

The catastrophe which caused the largest loss was a four day storm in mid-April. This storm caused wind, hail, tornado, and flooding damages from Texas to Maine. These damages have an estimated total of $1.35 billion.

The second largest loss was caused by the Witch Fire, which occurred in Southern California in October. After destroying more than 1,000 homes, the wildfire caused $1.1 billion in damages. This situation helped California become the state that had the largest losses in 2007, at $1.23 billion. Insurers World’s SOS team of large loss specialists were on site after the California wildfires in October 2007. To see images taken on site, click here.

Arson Fraud

In the past few years, the real estate market has been down, and foreclosure rates have been increasing. Unfortunately, some individuals who are unable to make their mortgage payments commit insurance fraud in the form of arson. The Coalition Against Insurance Fraud reported that with "untold thousands of homeowners struggling with ballooning subprime mortgage payments, fraud fighters are watching closely for a spike in arsons by desperate homeowners who can no longer afford their home payments."

The insurance industry is getting prepared for an increase in arson. Historically, as the economy is down, there is an increase in insurance fraud. Arson fraud is committed by property owners who intentionally destroy their property to collect money from their insurance company. This is most often committed by people who are in difficult financial situations. California's state insurance division has reported that the number of questionable residential fires increased 76% between 2006 and 2007.

According to the Insurance Information Institute, 10% of property/casualty insurance losses are fraudulent. As a result, many states have set up insurance fraud bureaus. There are currently 48 bureaus in 40 states.

Information for the above was gathered from:

• Mortgage and Foreclosure Information from the Census Bureau
• Unemployment Information from the U.S. Department of Labor - Bureau of Labor Statistics
• Arson in Suburban Areas Information from the FBI's Uniform Crime Reports

West Coast Storm Damages

A catastrophe modeling firm has projected damages for last weekend’s winter storm on the West Coast. The flooding, high winds, and heavy snow caused damages in three states: Washington, Oregon, and California. The area that was hit hardest was the Sierra Mountains near Lake Tahoe, where 11 feet of snow fell in a 72 hour time span. Wind was recorded at 110 mph with gusts up to 163 mph; this is the equivalent of category 2 hurricane winds.

The damages have been estimated at $600 million in insured losses. The majority of these losses are expected to have occurred in California. Pacific Gas & Electric said that approximately 2.4 million customers reported power losses during the storms. As of January 8th that number had decreased significantly to only 44,000 customers without power.

The director of research in atmospheric science at AIR Worldwide, Peter Dailey, said the following: “The storm was unlike classic Pacific Northwest winter storms, which tend to concentrate damaging winds along the coasts of Washington and Oregon. The track of this large system was fairly unusual in that some of the strongest winds and heaviest snows were over the northern half of California.”

Natural Catastrophes and Our Changing Climate

During the past few years it has become evident to many that natural disasters have increased in frequency. For example, in 2006 there were 850 catastrophes recorded worldwide. In 2007 there were 950 natural catastrophes. The losses sustained from these disasters cost $15 billion in 2006 and $30 billion in 2007.

In 2007, natural disasters in Asia (including storms, floods, and landslides) caused more than 11,000 deaths. Insured losses were highest in Europe, where Winter Storm Kyrill was the industry’s costliest catastrophe. The aftermath of Kyrill was a $5.8 billion in losses.

Dr. Torsten Jeworrek, a member of the Munich Re Group said the following: “The trend in respect of weather extremes shows that climate change is already taking effect and that more such extremes are to be expected in the future. We should not be misled by the absence of mega catastrophes in 2007… All the facts indicate that losses caused by weather-related natural catastrophes will continue to rise.”

According to Hadley Centre records, 2007 was the 7th warmest year worldwide, and the 2nd warmest in the northern hemisphere. During the past 13 years, 11 years have set records as being the warmest worldwide.

This past year, approximately 9 million acres were burned by wildfires. The chief of operations for the federal government was recently interviewed and stated the following: “Ten years ago, if you had a 100,000 acre fire, you were talking about a huge fire. And if we had one or two of those a year, that was probably unusual. Now we talk about 200,000 acre fires like it’s just another day at the office. It’s been a huge change.” Records of the acreage burned in America have been kept since 1960. Seven of the ten years with the largest fires have been since 1999.

To see our SOS images from the California Wildfires, click here.

*All currency has been converted to US Dollars.

Insurance Industry Observations for 2008

Steven Weisbart, the Vice President and Chief Economist for the Insurance Information Institute commented recently on the direction that the insurance industry will take in 2008. Although insurance profits peaked in 2006, he believes 2008 could be better as long as there are “no large catastrophes and investment results don’t plummet.” However, he went on to say that insurers should not hope for significant investment gains due to current interest rates and the stock market’s instability.

Weisbart pointed out that since 1970 there have only been two years that did not have an underwriting loss – 2006 and 2007. He also stated that as of the end of June, the property/casualty industry’s policyholder surplus was $512.8 billion, which is 5.3% above that of 2006, and 54% more than 1999.

Stephan Christiansen, the Senior Vice President and Director of Research for Conning Research & Consulting, said that his company examines industry segments to understand what drives change. He reported that those companies which use information and technology are more successful and exhibit better performance. He also pointed out the volatility in the industry, including government regulation and larger, more frequent catastrophes.

Christiansen believes that things look benign for the insurance industry for the next few years, although the soft market cycle may be repeated. Weisbart pointed out that after Hurricane Andrew there was a period of slow premium growth (1993-1997) and that the years following Hurricane Katrina (2006-2010) may resemble this.

2008 Hurricane Forecast

William Gray, and his team of forecasters at Colorado State University have released their prediction for the 2008 Atlantic Hurricane Season. They believe that there will be 13 named storms, 7 hurricanes, and 3 major hurricanes.

Gray’s predictions are noted by emergency responders in coastal areas, as he has been forecasting for over two decades. About this coming season he said the following: “Despite fairly inactive 2006 and 2007 hurricane seasons, we believe that the Atlantic basin is still in an active hurricane cycle. This active cycle is expected to continue at least for another decade or two.”

Gray often updates his predictions throughout the year. His initial prediction is released each December; six months before June, which is when the Atlantic Hurricane Season officially begins. He often updates these predictions in April, May, and August. The following table shows his December predictions and their accuracy: