NAIC’s financial risk disclosure requirement is broad, as climate change impacts insurers through a plethora of risk issues. Extreme weather events, government controls & effects of carbon emissions, rising water levels are just some of these issues.

Insurance companies are to report on how climate change will affect their business, in terms of financial risk plus their intended measure to manage this risk. Specifically, the climate change risk reporting requirements of insurance companies include:

1. Altering risk-management and catastrophe-risk modeling vis-a-vis the challenges caused by climate change;
2. Action plans to engage and educate policymakers and policyholders on the risks of climate change;
3. Changes in investment strategies.

Insurers, are not required to offer quantitative, forward-looking information nor commercially sensitive data.

“Climate change will have huge impacts on the insurance industry” said Joel Ario, chairman of the NAIC Climate Change and Global Warming Task Force of NAIC.

By bringing such focus on climate change, the insurance commissioners are leading the attention of insurers directly and policy holders indirectly to where it is due. The US insurance regulating body is also suggesting that insurance companies to tailor new products to the reality of climate change, such as insurance policies that curb emissions from policyholders, with auto coverage that tracks how many miles are driven and discounts for driving less.

Every insurance company whose annual premiums exceed $500 million will be required to lodge such an annual Insurer Climate Risk Disclosure report. The first report is due May 1, 2010.

The NAIC is a voluntary organization of the chief insurance regulatory officials for all 50 of the United States, the District of Columbia and five U.S. territories. Formed in 1871, the NAIC serves the needs of consumers and the industry. It has an overriding objective of supporting state insurance regulators as they protect consumers and maintain the financial stability of the insurance marketplace.

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California faces either costly or dramatic times ahead in its control of the elements. On the one hand it is experiencing drought, water shortage & fires, on the other hand it is facing floods.

With regards to floods, it is forecast that climate change may increase the ocean levels over the next several years, rising up to five feet by 2100. If such a worst-case scenario will come about, approximately half a million California residents will be at risk of flooding by 2100. This would place roughly $100 billion in commercial and residential property at risk.

About 2/3 of at-risk property is in the San Francisco Bay Area. Damages could be controlled with dunes, dikes, seawalls, and bulkheads, according to experts. However, these structures will cost the state of California approximately $14 billion.

The California Energy Commission explains “Because California has such a diverse topography, producing a variety of drastically different micro-climates, the effect of climate change on California is complex.

Climate variability and change will impact natural ecosystems and water resources. Major alterations to natural ecosystems due to climate change could possibly have negative consequences for our economy, which depends in part on our state’s lands, waters, and native plant and animal communities.”

A tailored approach will need to be devised. For example, a high-value area such as the San Francisco International Airport, which is surrounded on three sides by the bay, may obtain priority protection.

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“The very high natural catastrophe losses incurred in 2008 again show the crucial importance of risk research for the insurance industry. In its annual review published today, “Topics Geo – Natural catastrophes 2008″, Munich Re’s geo risks experts take an in-depth look at Hurricane Ike – with losses of US$ 15bn, the industry’s most expensive natural catastrophe in 2008.

Hurricane Ike, which hit several Caribbean States, the USA and even Canada, although by then weaker, claimed 168 lives. Ike bore several distinct features:

* Primarily due to the enormous area it covered, Ike had the greatest destruction potential ever recorded in a tropical North Atlantic hurricane. Known as “integrated kinetic energy”, this factor is calculated from the wind speed and dimensions of a storm. It is also used as a measure for storm surge.

* The vast extent of the storm caused a very large storm surge in the Gulf of Mexico. In all, 50 oil platforms were destroyed, and nearly 100 more reported minor to severe damage. A 500-km stretch of the Gulf Coast between Texas and Louisiana was under several metres of water.

* Ike ultimately merged with a low-pressure system above the land mass, producing gale-force winds and torrential rain in the Midwest (primarily Ohio, Kentucky and Indiana) and even on the East Coast of the USA and in Canada.

Torsten Jeworrek, member of Munich Re’s Board of Management: “Hurricane Ike clearly illustrates the importance of thorough risk research in identifying loss potential. It is this which enables us to explore new and continuously evolving risk complexes so as to render them manageable and push back the frontiers of insurability. We will continue to insist on a commensurate price for the risks written, particularly since climate change and settlement dynamics will further increase losses due to weather-related natural catastrophes”.

The 2008 hurricane season, with 16 tropical storms well above the long-term average of 10.3 (1950–2007), confirms Munich Re’s assessment that the current warm phase will probably result in higher loss potential. However, Hurricane Ike also made it abundantly clear to the insurance industry that loss estimates undertaken in the immediate aftermath of complex individual events are particularly fraught with uncertainty.

Aggregate losses caused by Ike exceeded initial estimates by modelling firms and the industry. Since insurance companies’ first estimates were too low, Munich Re’s final claims burden was also higher than originally anticipated. Munich Re now expects a claims burden of approximately US$ 680m (after retrocessions). This claims burden is already taken into account in the preliminary figures published on 4 February 2009 for the financial year 2008.

The new “Topics Geo – Natural catastrophes 2008″ also takes a detailed look at the substantial loss potential from winter damage in China, and analyses the severe earthquake that shook the Chinese province of Sichuan in May 2008. According to Munich Re’s geo risks researchers, the insurance industry should interpret the Sichuan earthquake as a warning signal. This catastrophe shows that the risk of earthquake should on no account be neglected in comparison with that of typhoon and flood.

2008 loss figures

On the basis of figures adjusted for inflation, 2008 was the third most expensive year on record in terms of insured and economic losses. Overall losses came to US$ 200bn, a figure exceeded only in the hurricane year of 2005 and in 1995, the year of the Kobe earthquake in Japan. Last year’s most expensive catastrophe in macroeconomic terms was the earthquake in Sichuan, with direct losses of at least US$ 85bn. Insured natural catastrophe losses totalled US$ 45bn in 2008.

Click here to gain your own copy of “Topics Geo – Natural catastrophes 2008″ “

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“Natural catastrophe remains a manageable and insurable risk for private insurers, provided they have the proper underwriting, rating, and risk mitigation tools,” said Laura Kersey, AIA northeast region assistant vice president. “Nonetheless, some state public policymakers have proposed supplanting the role of the private insurance system through the creation of state Cat Funds and other government solutions that would undermine efforts to reduce risk and to encourage personal responsibility.”

According to AIA’s written testimony opposing Senate Bill 530, all states face some natural catastrophe risk, but the type and magnitude of the risk varies greatly by state, by regions within a state, and by type of policyholder. “It is unfair to expect inland residents to subsidize coastal development and beachfront property, or small businesses to subsidize homeowners – yet such subsidies are integral to the design and financing of state CAT Funds,” said Kersey.

AIA pointed out that Florida is the only state that has taken the gamble that a government-imposed mechanism can provide coverage more effectively than the private market. However, in the aftermath of the devastating hurricanes of 2004 and 2005, the Cat Fund ran out of money. “The deficit is now being paid off by a hurricane tax on most policyholders in the state, including many residents and businesses that are located in less risky areas, and may not even have been in the state when the hurricanes struck,” explained Kersey. In some hurricane scenarios, those assessments could last up to 30 years.

“Fortunately, the private property and casualty insurance industry is well-positioned financially and operationally to manage natural catastrophe risk,” concluded Kersey.

AIA member companies write more than 40 percent of Connecticut’s homeowners’ insurance market and almost half of the state’s property insurance market.

# # #

The American Insurance Association represents approximately 350 major insurance companies that provide all lines of property and casualty insurance and write more than $123 billion annually in premiums. The association is headquartered in Washington, D.C. and has representatives in every state. All AIA press releases are available at www.aiadc.org.

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The National Flood Insurance Program was established to help people recover from floods by offering them affordable flood insurance. As part of its extensive services, the program offers an interactive tool on its website that can help consumers determine what would be the real cost of flooding in their home.

This measuring tool of the impact of flood waters gives you inch-by-inch insights and cost estimates that can help you determine how much insurance to take out. Their flood cost figures are based on the hypothesis of a flood damage to the main floor of a fictional 900-square-foot ranch-style home. Actual replacement, repair and labor costs will of course vary by state, home and market timing.

We tried the tool and discovered:

• Four inches of water costs to basically the same as two: $7,800
• The breakdown of this amount is as follows:
  Replace drywall: $1,350
  New baseboard moulding: $2,250
  Replace carpet and flooring: $2,700
  Cleanup & materials: $1000
  Books, lamps, etc: $500

• At 5 inches of water, the figures go up dramatically to $11,480, as now you will have to replace furniture, computers & accessories, CDs and books and repaint the interior.
• At 9 inches of flood water, the cost of the damage nearly reaches $19,000.
• At 26 inches of flood water, you’re looking at a water damage cost of over $26,000.
  You’ll have to also repair your electrical system, your furnace and AC, replace/repair kitchen and bath cabinets, buy new kitchen appliances, replace living room furniture, clean and repaint the exterior of your home, replace warped doors, buy new TV, DVD and stereo equipment, and buy new personal items such as clothing.

You can find the flood water impact measuring tool at the National Flood Insurance Program’s website at http://www.floodsmart.gov/floodsmart/ .

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By the year 2020, a third of the 3 million proposed homes set to be built in Britain, could be on a flood plain according to the Association of British Insurers (ABI). If this is the case the ABI have warned their members that they may not be able to continue to offer flood cover as standard on home insurance policies.

The ABI’s assistant director, Justin Jacobs said, “The government’s ambitious housing plans are in jeopardy unless we reduce the flood risk. In the last year, thirteen major developments have been given the go-ahead despite Environment Agency advice on the flood risk”

Jacobs insists that insurers do want to continue to provide flood cover for homeowners, but warned that poor decisions on planning would create homes that would become too hard to sell, insure and live in, he said, “Where a local authority plans to ignore flood risk advice, the government should step in and review the proposals and be compelled to publish their decision.”

The government though, claim they have introduced the strongest planning rules ever to ensure that councils are properly managing the risk of flooding. They have done this by handing down power to the councils who will decide on whether to give planning permission for new housing developments, but only after consultation with the Environment Agency.

The cost of clearing up after the flooding in Yorkshire and Gloucestershire during the summer of 2007 was put at £3 billion, with the ABI claiming that its members had paid out up to £1 billion towards meeting the claims.

15,000 families were left in temporary accommodation with three quarters of them having to wait over 4 months before they could return to their homes.

Representatives from the ABI met with Members of Parliament to discuss its ‘Statement of Principles’, which included a pledge for the continuation of flood insurance to be offered to its existing policyholders who lived in an area where the risk of flood was being managed.

Director General of the ABI, Stephen Haddrill said, “The statement can only continue if the government commits to addressing the lessons learned from the summer of 2007. That will require major new total investment from government and others.”

Homeowners who live on floodplains have been warned that they face a ‘hefty hike’ in home insurance premiums following the continued flooding which is being linked to climate change.

This advice came from Richard Mason of price comparison website Moneysupermarket.com, he said, “From the figures presented by Defra, the average cost of settling a claim for flooding has now jumped to between £70,000 and £200,000 per household. This amount is unsuitable for the insurance industry to bear in the long term unless insurance premiums rise.”

He went on to say that anyone looking to buy a property should check first with the Environment Agency’s flood map and consider the repercussions financially from buying property in a designated flood zone.

by Phil Benson

Phil Benson is an author of several articles pertaining to Home Insurance He is known for his expertise on the subject and on other Business and Finance related articles.

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category 1– clean water.
Examples of clean water sources may include:broken pipes,tub overflows,sink overflows, many appliance malfunctions, falling rainwater, broken toilet tanks and even toilet bowls in some cases.

category 2–gray water.
Gray or unsanitary water contains some degree of contamination. Some examples of “gray” contaminated water may include:overflow from a dishwater, washing machine or a toilet bowl, broken aquarium, and maybe a punctured water bed. Gray water in flooded structures is significantly aggravated by time and temperature.

category 3–black water.
Heavily and grossly unsanitary, “black” water arise from large quantities of sewage entering a structure. This category also includes all forms of ground surface water rising from rivers or streams as well as sea water. This will also include all forms of sewage overflow or damage. In situations where structural components and/or contents have been heavily contaminated with such materials as pesticides, heavy metals or toxic organic substances, the water damage is known to be “black” water.

If you are unfortunate enough to encounter any of the damages listed. The proper protocol is to start the drying process, clean up and antibacterial sanitizing as soon as possible. Thus, much of the structure and sub-structure can be saved from any further damage.

By Vicky Bar

By vicky bar at http://www.flood-pro.com
Southern California 24/7 Premium emergency water damage service and drying. Serving:Los Angeles County, Orange County, Riverside County and all surrounding areas.

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“Thus, the number of tropical cyclones is expected to be at slightly above or near normal levels, ” says James Nash, Guy Carpenter CEO of the Asia Pacific Region.

By National Underwriter (Property & Casualty – Risk & Benefits Management Edition) (07/24/08)

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Flood Insurance Claim Filing Steps

The claim filing steps to take according to US national flood insurance program are:

1.) CONTACT THE INSURER
In the incident of a flood, call your agent or insurance company promptly. When you call, be prepared. You will need following:
a. Your insurance company’s name and claim phone number (or your agent’s number);
b. Your policy number; and
c. A telephone and/or email address where you can be reached.
After your call, a claims adjuster will be assigned to you. This person will assist you with the evaluation of your loss. He/she will also help file your flood insurance claim.

If you will have to go to a shelter or otherwise will be out of reach, offer your agent a trusted point-of-contact, such as a friend or relative who can reach you if necessary. Contact your insurance agent or company again, if an adjuster has not been assigned to you within a few days of your phone call.

2.) SORT & RECORD
When you are allowed back to your home or commercial site, you can start separating your damaged from undamaged property. Realize it’s not yet ‘cleaning up’ time, but ‘recording’ time. Tips:
a. Photograph and videotape everything—from structural damage and floodwater levels on building exteriors to building interiors and contents—to help prepare documentation of what the flooding damaged.
b. Do not throw out damaged property before your adjuster has seen it unless it may be a health hazard or could impede local cleanup.
c. If objects must be discarded, take photos and keep samples (fabric swatches, pieces of furniture, etc.) to help substantiate your claim.
d. Photograph standing water, both outside and inside your home or business.

3.) ITEMIZE THE DAMAGE
There are really two steps here:
a. The first step is to make a list of all damaged or lost items.
b. The second step is to work alongside your claims adjuster. You are itemizing your claim, and calculating the value of the destroyed items by applying your detailed inventory against your damaged or lost property.

Flood Insurance Preparation Tip
Ideally, before there is any drama, e.g. when you are taking out or renewing your insurance annually, you have created a personalized “flood file” . This flood file is to contain a copy of your insurance policy with the contact information for your agent or insurance company; a complete inventory of the possessions in your home or business on a room-by-room basis. Describe each item and include serial numbers, model numbers, date of purchase, and receipts; photos or videos of your possessions; plus copies of other important papers.

Hopefully you have safely stored your flood file in a secure place, i.e. away from the property you are insuring, typically in a safety deposit box.

4.) FILING YOUR CLAIM
Timing matters! File your official claim for damages within 60 days of the flood. Your signed, sworn statement, called Proof of Loss, substantiates the insurance claim. This official document is required for the National Flood Insurance Program (NFIP) or insurance company to be able to make payment.

Steps:
a. Your adjuster should provide you with the insurance claim form. However, it is your responsibility to provide your insurance company with a signed Proof of Loss within 60-days of the date of loss.

b. You must include a detailed estimate to replace or repair the damaged property. You can obtain this estimate from your insurance claims adjuster. You should both come to an agreement about the scope of damage and what needs to be repaired or replaced.

c. Your claim is payable after you and the insurer agree on the amount of damages and the insurer receives your complete, accurate and signed Proof of Loss.

If major catastrophic flooding occurs, it may take longer to process claims and make payments because of the sheer number of claims submitted.

Stay covered & renew your policy annually.

source: The US national flood insurance program at Floodsmart.gov

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USDA support available to them include:

Financial Assistance for Flooded Farms

Individual farmers in primary and contiguous counties can seek assistance through an Emergency Conservation Program from June 23 through July 11. . They can receive cost-share assistance of 75% or more of the cost to implement approved emergency conservation practices such as removal of debris and restoration of fences and conservation structures.

Farmers and ranchers affected by natural disasters can apply for the Emergency Conservation Program (ECP) by the USDA’s Farm Service Agency. ECP provides financial assistance for the restoration of farmlands on which normal farming operations have been impeded by natural disasters. ECP also helps with funds for carrying out emergency water conservation measures during periods of severe drought. Emergency conservation assistance is available for removing debris and restoring permanent fences, terraces, diversions, irrigation systems, and other conservation installations. Conservation problems that existed before a disaster are not eligible.

In addition, farmers in primary and contiguous counties are also eligible for low-interest emergency loans from the USDA Farm Service Agency.

Financial Assistance to Flooded Counties

Counties affected by flood can immediately apply for USDA’s Emergency Watershed Protection program. The goal of this program is to undertake emergency measures to relieve imminent hazards to life and property created by a natural disaster.

Emergency Watershed Protection (EWP) is a program that helps protect lives and property threatened by natural disasters such as floods, hurricanes, tornadoes, and wildfires. The program is administered by the USDA’s Natural Resources Conservation Service (NRCS), which provides technical and financial assistance to preserve life and property threatened by excessive erosion and flooding.

Types of Assistance

There is traditional financial support available to those suffering the consequences of natural disaster:
a. EWP provides funding to project sponsors for such work as clearing debris from clogged waterways, restoring vegetation, and stabilizing river banks. The measures that are taken must be environmentally and economically sound and generally benefit more than one property owner.
b. NRCS provides up to 75 percent of the funds needed to restore the natural function of a watershed. The community or local sponsor of the work pays the remaining 25 percent, which can be provided by cash or in-kind services.

More information

The Emergency Watershed Program (EWP) also provides for the purchase of floodplain easements as an emergency measure. Since 1996, NRCS has purchased floodplain easements on lands that qualify for EWP assistance. Floodplain easements restore, protect, maintain, and enhance the functions of the floodplain; conserve natural values including fish and wildlife habitat, water quality, flood water retention, ground water recharge, and open space; reduce long-term federal disaster assistance; and safeguard lives and property from floods, drought, and the products of erosion.

Land Eligibility

NRCS may purchase EWP easements on any floodplain lands that have been impaired within the last 12 months or that have a history of repeated flooding (i.e., flooded at least two times during the past 10 years). Purchases are based upon established priorities. Landowner applications for the program far exceed funding. NRCS maintains a list of easement offers that meet basic eligibility criteria at the time of application. These offers continue to be eligible pending availability of funding.

Easement Payments

Under the floodplain easement option, a landowner voluntarily offers to sell to the NRCS a permanent conservation easement that provides the NRCS with the full authority to restore and enhance the floodplain’s functions and values. In exchange, a landowner receives the least of one of the three following values as an easement payment: (i) a geographic rate established by the NRCS state conservationist; (ii) a value based on a market appraisal analysis for agricultural uses or assessment for agricultural land; or (iii) the landowner offer.

Restoration of the Floodplain

The easement provides NRCS with the authority to restore and enhance the floodplain’s functions and values. NRCS may pay up to 100% of the restoration costs. To the extent practicable, NRCS actively restores the natural features and characteristics of the floodplain through re-creating the topographic diversity, increasing the duration of inundation and saturation, and providing for the re-establishment of native vegetation. The landowner is provided the opportunity to participate in the restoration efforts. NRCS may pay 75 percent of the cost of removing buildings when appropriate.

Landowner Use

Landowners retain several rights to the property, including quiet enjoyment, the right to control public access, and the right to undeveloped recreational use such as hunting and fishing. At any time, a landowner may obtain authorization from NRCS to engage in other activities, provided that NRCS determines it will further the protection and enhancement of the easement’s floodplain functions and values. These compatible uses may include managed timber harvest, periodic haying, or grazing. NRCS determines the amount, method, timing, intensity, and duration of any compatible use that might be authorized. While a landowner can realize economic returns from an activity allowed for on the easement area, a landowner is not assured of any specific level or frequency of such use, and the authorization does not vest any right of any kind to the landowner. Cropping is not authorized and haying or grazing would not be authorized as a compatible use on lands that are being restored to woody vegetation.

Eligibility

Owners, managers, and users of public, private, or tribal lands are eligible for EWP assistance if their watershed area has been damaged by a natural disaster.

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