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LESSONS FROM HURRICANE SANDY - IMUA

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Source: NASA<br />

<strong>LESSONS</strong> <strong>FROM</strong> <strong>HURRICANE</strong> <strong>SANDY</strong><br />

Mark Bove, CPCU, ARe<br />

Senior Research Meteorologist<br />

<strong>IMUA</strong> Annual Meeting<br />

21 May 2013


Agenda<br />

• Hurricane Sandy<br />

• Storm History<br />

• Why did Sandy become a “Superstorm”<br />

• Storm Impacts<br />

• Wind<br />

• Precipitation<br />

• Storm Surge<br />

• Underwriting & Catastrophe Modeling Lessons<br />

• Application of Hurricane Deductibles<br />

• Accuracy of Surge Modeling<br />

• Flood Exposure Data<br />

• Location of Contents<br />

• Marine Exposures


Hurricane Sandy<br />

Source: NASA


Source: NASA<br />

Source: NASA<br />

Storm History: Hurricane Sandy<br />

• October 22: Tropical<br />

Depression #18 is classified<br />

in the south-central<br />

Caribbean Sea. The<br />

depression is upgraded later<br />

that day, becoming Tropical<br />

Storm Sandy, as it moved<br />

slowly northward.<br />

• October 24: Sandy begins a<br />

period of rapid intensification.<br />

Becomes Cat 1 hurricane<br />

before landfall in eastern<br />

Jamaica, then Cat 3 before<br />

landfall over eastern Cuba.


Source: NASA<br />

Source: NASA<br />

Storm History: Hurricane Sandy<br />

• October 25-26: Sandy exits<br />

Cuba, then passes over the<br />

eastern Bahamas. Weakens<br />

back into Tropical Storm due<br />

to wind shear but storm size<br />

increases dramatically.<br />

• October 27-28: Sandy moves<br />

northeastward, hundreds of<br />

miles off the Carolina coast.<br />

Sandy regains hurricane<br />

intensity.


Source: NASA<br />

Storm History: Hurricane Sandy<br />

• October 29: Sandy turns<br />

northward, then northwest.<br />

Reaches a secondary<br />

maximum intensity of 85 kts<br />

(100 mph). Forward motion<br />

also accelerates as storm<br />

moves towards the coast. Wind<br />

field continues to expand.<br />

• Once over colder water, Sandy<br />

starts to lose tropical<br />

characteristics, becoming<br />

“post-tropical” just before<br />

landfall near Atlantic City, NJ.


Title of presentation and name of speaker<br />

6/13/2013<br />

Source: NOAA<br />

7


Title of presentation and name of speaker<br />

6/13/2013 8


Hurricanes off the New Jersey Coastline, 1851 - 2011<br />

Sandy’s Path<br />

Title of presentation and name of speaker<br />

6/13/2013 9<br />

Source: NOAA


Why did Sandy Become a “Superstorm”<br />

• At landfall in New Jersey, Sandy possess some unusual path, size, and<br />

hazard characteristics, leading the storm to be dubbed a “Superstorm”<br />

by the media, including:<br />

• West-northwestward motion into New Jersey coast<br />

• Very large wind field<br />

• Extreme storm surge in New York & New Jersey<br />

• The term “Superstorm” is a creation of the media. There is no formal<br />

meteorological meaning for this term.<br />

• In meteorological terms, Hurricane Sandy completed a process known<br />

as Extratropical Transition just before landfall. This resulted in the<br />

National Hurricane Center classifying Sandy as “Post-Tropical”, which<br />

means Sandy had become an extratropical cyclone.


Source: NASA<br />

Source: NASA<br />

Understanding Extratropical Transition:<br />

Types of Large-Scale Storms<br />

Tropical Cyclones<br />

• Low pressure center warmer than<br />

surroundings (Warm-Core Low).<br />

• Develop in air masses of relatively<br />

constant temperature and humidity.<br />

• Symmetrical shape.<br />

• Weak upper-level winds aloft.<br />

Extratropical Cyclones<br />

• Low pressure center colder than<br />

surroundings (Cold-Core Low).<br />

• Develop in areas of temperature<br />

gradients between differing air masses.<br />

• Asymmetrical Shape<br />

• Strong upper-level winds critical in<br />

development and intensification.


Source: NASA<br />

Source: NASA<br />

Understanding Extratropical Transition<br />

• Process of tropical cyclone becoming an extratropical (frontal) cyclone.<br />

Usually induced when hurricanes interact with colder, drier air, jet<br />

streams, or extratropical weather systems.<br />

Floyd as Tropical Low<br />

Floyd as Transitioning Low


Source: NOAA/NCEP<br />

Title of presentation and name of speaker<br />

6/13/2013 13


Title of presentation and name of speaker<br />

6/13/2013 14


Source: NASA<br />

Title of presentation and name of speaker<br />

6/13/2013 15


Sea Surface Temperatures, Late October 2012<br />

Source: NOAA<br />

Title of presentation and name of speaker<br />

6/13/2013 16


Source: NOAA


Why did Sandy turn West<br />

Source: NOAA<br />

Title of presentation and name of speaker<br />

6/13/2013 18


Why did Sandy have such a large windfield<br />

Why was the storm surge so extreme<br />

Source: NOAA


Source: Munich Re<br />

Sandy Impacts


Sandy Impacts - Overview<br />

• Second largest insured loss in the United States due to a tropical cyclone<br />

in terms of original dollar loss, $30 bn. (First: Katrina (2005), $60 bn)<br />

• Estimated economic losses of $65 bn.<br />

• Most damaging tropical cyclone in the Northeastern United States since<br />

the 1938 Great New England Hurricane.<br />

• Wind damage observed across 15 states & Canadian Maritime provinces<br />

• Record storm surges along New York and New Jersey Coastlines<br />

causing extensive damage.<br />

• Power outages widespread across the region due to both wind and<br />

surge.<br />

• Major infrastructure damage in New York City.


Hurricane Sandy<br />

Maximum 1-Minute Sustained Winds & Gusts<br />

Source: NOAA<br />

Title of presentation and name of speaker<br />

6/13/2013 22


Examples of Sandy Wind Damage<br />

Source: Munich Re<br />

Title of presentation and name of speaker<br />

6/13/2013 23


Examples of Sandy Wind Damage<br />

Source: Munich Re<br />

Title of presentation and name of speaker<br />

6/13/2013 24


Hurricane Sandy<br />

Rainfall Totals<br />

Source: NOAA<br />

Title of presentation and name of speaker<br />

6/13/2013 25


Hurricane Sandy<br />

Snowfall Totals<br />

Source: NOAA<br />

Title of presentation and name of speaker<br />

6/13/2013 26


Hurricane Sandy<br />

Storm Surge (Height above ground level)<br />

Source: NOAA<br />

Title of presentation and name of speaker<br />

6/13/2013 27


Hurricane Sandy<br />

Storm Surge Damage, Mantoloking, NJ<br />

Source: NOAA


Hurricane Sandy<br />

Storm Surge Damage<br />

Title of presentation and name of speaker<br />

6/13/2013 29


Hurricane Sandy<br />

Storm Surge Damage<br />

Source: Munich Re<br />

Title of presentation and name of speaker<br />

6/13/2013 30


Hurricane Sandy<br />

Storm Surge Damage<br />

Source: Munich Re<br />

Title of presentation and name of speaker<br />

6/13/2013 31


Underwriting and Cat Modeling Lessons From Sandy<br />

Source: Carl Hedde / Used with Permission


Lessons from Sandy:<br />

Hurricane Deductibles<br />

• Designed to reduce insurance costs for consumers by requiring a higher<br />

deductible for rare, but extreme loss events, like hurricanes.<br />

• Each state can independently define how a hurricane deductible is<br />

triggered in their state.<br />

• “Named Storm” – Any storm named by the National Hurricane<br />

Center<br />

• Hurricane – Any storm classified as a hurricane at landfall by the<br />

National Hurricane Center<br />

• Variations: Only Cat 2 & Above, etc.<br />

• Storm must make direct landfall over the state.


Lessons from Sandy:<br />

Hurricane Deductibles<br />

Source: State of New Jersey


Lessons from Sandy:<br />

Hurricane Deductibles<br />

• For two consecutive years, borderline-hurricane events have made<br />

landfall in the northeast, but hurricane deductibles haven’t been allowed to<br />

be applied.<br />

• This means that the modeling assumption of using a hurricane<br />

deductible for weak Cat 1 hurricanes or transitioning storms may be<br />

incorrect.<br />

• This practice artificially reduces the loss costs for portfolios because<br />

the fire deductible isn’t used in the modeling.<br />

• Currently, some models typically only accept one deductible type per peril.<br />

• Do we ask for wind and fire deductibles in data submissions<br />

• For which storms in the event set should the fire deductible be used<br />

with


Lessons from Sandy:<br />

Storm Surge Modeling<br />

Surge is only partially<br />

dependent on storm<br />

intensity. Do the models<br />

reflect that large surges<br />

can be generated by<br />

weaker hurricanes or<br />

storms undergoing<br />

transition<br />

Flooded areas in New York<br />

by hurricane category<br />

(SSHS)<br />

Category 1<br />

Category 2<br />

Category 3<br />

Category 4<br />

Source: Munich Re – Severe weather in North America, 2012


Lessons from Sandy:<br />

Flood Exposure Data<br />

• There are no statistical inland flood models available for the United<br />

States (coastal surge modeling exists), largely due to the fact that most<br />

flood risks in the US are federally insured via the NFIP.<br />

• Historically, there has been low demand by model clients to develop<br />

these models.<br />

• Developing an inland flood model would be a huge project, taking<br />

modeling companies years to develop.<br />

• As a result, the capturing of data for privately-insured flood risks in the<br />

industry significantly lags data capture for other perils.<br />

• Current modeling of flood risks for surge, when known, is also limited by<br />

ability of models to handle flood sublimits and accurately determine<br />

amount of flood damage that “leaks” into the wind policy claim.


Lessons from Sandy:<br />

Location of Contents<br />

• The location of contents within an insured location is critical when<br />

assessing flood loss potential, particularly for commercial and industrial<br />

risks.<br />

• Examples:<br />

• Hospitals (MRIs, CAT Scan Machines, Radiology equipment)<br />

• Office Buildings (Electrical and IT equipment, etc.)<br />

• Specialty businesses (Art Galleries)<br />

• Models tend to spread out contents value over the number of stories<br />

within a building. This could lead to an underestimation of the amount of<br />

contents at risk to flood losses.


Lessons from Sandy:<br />

Impact to Marine Industry<br />

• Inland/Ocean Accumulation Risks<br />

• Ports and stevedore operations exposed to significant storm surge<br />

• Chelsea art district flood and storm surge exposure<br />

• Are cargo/transit policy occurrence limits adequate<br />

• Warehouses<br />

• Flood maps are inaccurate – location and aggregation issues<br />

• How cargo is stored matters<br />

• Yachts & Marinas<br />

• Haul-outs caused more damage than proper mooring in place<br />

• Pilings too short<br />

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


Source: NASA<br />

THANK YOU! ANY QUESTIONS<br />

Mark Bove<br />

mbove@munichreamerica.com


© Copyright 2013 Munich Reinsurance America, Inc. All rights reserved. "Munich Re" and the Munich Re logo are<br />

internationally protected registered trademarks. The material in this presentation is provided for your information only, and<br />

is not permitted to be further distributed without the express written permission of Munich Reinsurance America, Inc. or<br />

Munich Re. This material is not intended to be legal, underwriting, financial, or any other type of professional advice.<br />

Examples given are for illustrative purposes only. Each reader should consult an attorney and other appropriate advisors<br />

to determine the applicability of any particular contract language to the reader's specific circumstances.<br />

Source: NASA

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