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Summary

Six hurricanes hit the U.S. mainland in 2008 but the strongest hurricane of those to form in the Atlantic, and the third costliest storm ever to hit the United States, was Hurricane Ike.  Ike was a Category-4 storm that battered Haiti, causing dozens of deaths there, and another seven in Cuba before it headed to the Texas coast. Ike was an amazingly large storm, and seemed to cover a huge portion of the Gulf of Mexico as it slowly regained strength, before striking Galveston as a Category-2 storm Sept. 13, killing as many as 82 and causing some estimated $30 billion in damages.

With the insurance market’s recent softening during the year due to two previous years of low storm activity, carriers, despite the lack of proper tools, have attempted to actively produce flood business to replace lost premium.  Subsequently, the inability to accurately quantify flood risk associated with storm surge like we saw with Ike, has led companies to attempt to minimize – if not eliminate – flood risk from portfolios. This is unfortunate for residential and commercial customers who, despite economic woes, will continue to need access to excess flood coverage over and above the limits set by the NFIP.

Profitably underwriting storm surge starts with accurate and granular geocoding. The smallest positional inaccuracy can result in material differences in risk. The Parcel-level geocoding provided by CoreLogic not only provides the positional accuracy required to assess risk, it also facilitates accessing pertinent asset information tied directly to that parcel, such as construction type, year built, and number of stories.
Beyond parcel-level geocoding, underwriting any flood requires an incremental and granular risk assessment well beyond 100-year and coastal designations. With CoreLogic’s Storm Surge analytics package, Individual location risk scores are now available to evaluate the hazard on a continuum expressed as scores or categories that range from ‘low’ through  ‘extreme ’ risk. This information enables underwriters to optimally structure and price coverage.

The insurance industry also now has access to a recently released probabilistic flood models that capture storm surge risk and quantifies the financial risk associated with storm surge aggregations. This provides the ability to determine the Probable Maximum Loss (PML) for an event, a function once reserved for earthquake and hurricane-wind exposure. Using a financial model for surge risk ensures that risk capital is allocated appropriately and that reinsurance coverage is determined correctly.

Given the numerous risk factors that contribute to any flood hazard assessment, many insurers are employing mapping or other visualization tools to better understand the spatial significance of such factors. Basic mapping tools include water features and flood zones, while more advanced solutions depict the inundation zones for failed levees and dams, and illustrate how storm surge rises up through a beach front city, or how a flooding river might overtop its banks and wind through an adjacent downtown.  CoreLogic can provide the key data ingredients to make these visualizations meaningful.

This video was produced in partnership with Pictometry.  All other names and trademarks are property of their respective owners.{/tab}