1 Wind vs. Water and Unique Monroe County Mitigating Factors for Wind Damage A Presentation to the Florida Commission on Hurricane Loss Projection Methodologies Prepared by the Grassroots Organization FIRM Fair Insurance Rates in Monroe August 17, 2011
2 FIRM Would Like to Gratefully Acknowledge the Improvements We See in the Modeling Including: Additional Data Inputs Regional Vulnerability Characteristics Commercial-Residential Decay Rates References to Storm Surges Roughness
3 FIRM s Vision: Appropriate physical and financial protection for property in the Keys to sustain and support our communities. We understand the need for accurate rates We desire sound rate structures based on good science 3
4 Model and Rate Accuracy If the models are not accurate the rates are not accurate If the rates are not accurate the PML and FHCF needs are incorrect Then, residents are over billed, or underbilled, and Reduced private insurers
5 Wind vs. Flood (Storm Surge) The Keys are a low-lying chain of islands, with the highest elevation at 14 feet. (1) According to meteorologists at the National Weather Service, the greatest threat to the Keys from Category 3 and higher hurricanes predicted by SLOSH (Sea, Lake and Overland Surge from Hurricanes) models is from storm surge, not wind. Any wind damage that would occur would be washed away by the surge. (2) Thus, flood insurance would pay first and most for the greatest portion of damage occurring from a significant hurricane. Wilma, a storm many consider to be the 100-year storm, demonstrated this. (1) NOAA Satellite and Information Service, (2) Matt Strahan, Meteorologist in Charge, National Weather Service, Key West Slide 5 August 23, 2011
6 Wind vs. Storm Surge Losses: Inundation by Hurricane Strength Most of the Florida Keys would flood in a storm of Category 2 or greater. A Category 3 or higher storm would cause significant flood damage. SOURCE: Monroe County Emergency Management Slide 6 August 23, 2011
7 Excerpts from presentation to FPM by Matt Strahan, [Former] Meteorologist In Charge, Key West National Weather Service Forecast Office at the Request of Commissioner George Nugent
9 Hurricane Wilma, Vaca Key Florida PRELIMINARY SLOSH +PRE TIDE (ft) NGVD29 30 rmw PREDICTED TIDE (ft) NGVD 28 OBS TIDE (ft) NGVD Height (ft) above NGVD /24/2005 0:00 1:00 2:00 3:00 4:00 5:00 6:00 7:00 8:00 9:00 10:00 11:00 12:00 13:00 14:00 15:00 16:00 17:00 18:00 19:00 20:00 Time (UTC)
10 Key West Inundation Map Source - FL Dept of Emergency Management Cat 1 Cat 2-3 Cat 4-5 Dry
11 Wind vs. Flood: Claims Paid in Monroe After Hurricane Wilma, flood insurance paid 14 times more in claims than wind insurance did. This is especially noteworthy because flood insurance coverage is limited to $250,000/property. Flood claims for Hurricane Wilma alone exceeded all wind claims paid in 2005 for four named storms (Dennis, Katrina, Rita, Wilma). (1) Citizens Property Insurance as of February 28, 2006 (2) National Flood Insurance Program as of 6/30/09 (3) Citizens Property Insurance as of July 2008 Slide 11 County In Millions $350 $300 $250 $200 $150 $100 $50 $0 $23 $322 Claims Paid $92 Wilma Wind Claims (1) Wilma Flood Claims (2) Total 2005 Wind Claims (3) August 23, 2011
12 Bolivar Peninsula Before Ike
13 Bolivar Peninsular After Ike Several roofs left in-tact as the surge washed the house out from under them. Does wind insurance pay anything for this damage?
14 Key West and Stock Island Representative Examples of Keys Storm Surge Risk Much of the Keys housing is 6ft MSL or lower in elevation and is built on fill. Many historic examples of catastrophic surge damage to structures that have little to no wind damage. Category 3 or higher hurricanes will cause catastrophic storm surge damage.
15 1910 Surge Damage Example La Brisa on Atlantic end of Simonton Street in Key West. Foundation Washed Out. Zero Wind Damage roof even reused on another house.
16 1909 Surge Damage Example Lower level washed out, upper level of building shows no wind damage.
17 1960 Donna Damage in Marathon Does wind or flood insurance pay for these houses?
18 1960 Donna Damage in Marathon Does wind or flood insurance pay for these houses?
19 What Does This Mean? If a home is damaged from wind, the roof is damaged, the rain comes in. It soaks the walls and carpet, and the furniture. It also floods 3 feet deep. How much of the wind damage is CPIC likely to cover? Clearly, flood destroyed everything from 3 feet down, so flood insurance will cover the affected doors, 5 feet of drywall, painting, affected contents, etc. How much is built into the rates for this event? 100% 19
20 What Does This Mean? Insured's pay rates assuming insurers will pay for all these damages Many insured s pay for flood insurance which will actually pay for the damages In this case insurers would have collected rates for losses that clearly will not be a loss to insurers This does not seem actuarial sound. 20
21 Estimate of Wind vs. Surge Damage by Storm Strength Key West Average Storm Tide** Vs. Storm Category for Average 1000 SF home Hurricane Average Storm Tide in feet Average Ground floor in feet Average Flood in Home in feet FL Public Model Wind Damage Ratio* % Water Damage Estimated Cost of Wind Damage*** Estimated Cost of Flood Damage*** Cat % 71-97% $35,000 to $92,500 $177,500 to $242,500 Cat % 59% $35,000 $147,500 Cat % 49% $1,250 $122,500 *Source: FL Public Model presentation June, 2009, extrapolated estimate by FIRM Engineer based on Masonry Structure Vulnerability slide No. 81 **15mph forward speed, tide 2 ft NGVD1929, Calculated by SLOSH Model *** Based on FL Public Model presentation June 2009, slide 98. $250,000 home June 2011 FPM slides indicate increased losses from wind of 23 to 53% of estimated damage (Model Overview slide 145) Slide 21 August 23, 2011
22 Vulnerability Is a building built to withstand 100 MPH winds as strong as one built to 150 mph? In the FL. Public Model all 2002 or newer structures are strong in all regions (June 16 presentation pg 39) The minimum wind speed that generates Damage should be reasonable Is it the same in Monroe (150 MPH design) as Hamilton or Holms Counties (110 MPH)?
23 Vulnerability The FPM suggests an increase in loss costs due, in part, to an increase in wood frame structures (June 2011 presentation) However, a wood frame built in Monroe to 150 MPH, replacing a demolished 1960 structure may be decreasing loss costs. Is this accounted for in the model?
24 This is a Start? Do all the modelers actually survey building departments and property appraisers? The FPM increased Property Appraiser contacts from 9 to 33 (June 2011 presentation pg. 62) 31 most populated counties were contacted (90% of FL population) 21 provided databases 19 counties had some good information 13 had most of the information needed 46 fair to no data (33 no data)
25 Mr. Joe Paskalik Monroe County Building Official Member of the Monroe County Building Dept. since 1987
26 Enforcing the Standard Building Code with Hurricane resistant Construction (SBCCI) Use ASCE windloads Minimum County Code All home required to be designed by Architect or Engineer All staff and contractors required to have licenses 1993 Prior to that County staff had certifications
27 What Did Monroe Design To? 115 MPH 130 MPH 150 MPH Some built to higher standards
28 A-1 Modeled Loss Costs and Probable Maximum Loss Levels Modeled loss costs and probable maximum loss levels shall reflect all insured wind related damages from storms that reach hurricane strength and produce minimum damaging windspeeds or greater on land in Florida..Audit 3. The model will be reviewed to determine whether (if so, how) the model takes into account flood or hurricane storm surge. FPM: Discussed that the model does not take into account flood or storm surge damage other than the effects of storm surge damage on the infrastructure. ARA: Verified that the model does not take into account flood or storm surge other than the effects of storm surge damage on the infrastructure. EQE: Discussed that modeled losses do not include storm surge and flood damage other than the implicit effects of storm surge damage on the infrastructure. Discussed that there was no explicit adjustment for storm surge damage to infrastructure.
29 V-1 Derivation of Vulnerability Functions G. Vulnerability functions shall include damage due to hurricane hazards such as windspeed and wind pressure, water infiltration, and missile impact. Vulnerability functions shall not include explicit damage due to flood, storm surge, or wave action. A-3 How is Flood/storm surge and wave action taken out? The old historic storms in Fl that had large surges can t rightly be used due the lack of available data.
30 A-3 Loss Cost Projections and Probable Maximum Loss Levels C. A-3 Loss Cost Projections and Probable Maximum Loss Levels Loss cost projections and probable maximum loss levels shall not include any provision for direct hurricane storm surge losses. How is Flood/storm surge and wave action taken out? The old historic storms in Fl that had large surges can t rightly be used due the lack of available data.
31 A-6 Logical Relationship to Risk A. Loss costs shall not exhibit an illogical relation to risk, nor shall loss costs exhibit a significant change when the underlying risk does not change significantly.
32 A-8 Contents A. The methods used in the development of contents loss costs shall be actuarially sound. B. The relationship between the modeled structure and contents loss costs shall be reasonable, based based on the relationship between historical structure and contents losses.
33 A-10 Output Ranges A. Output ranges shall be logical and any deviations supported. B. All other factors held constant, output ranges produced by the model shall reflect lower loss costs for: 1. masonry construction versus frame construction, 2. personal residential risk exposure versus mobile home risk exposure, 3. in general, inland counties versus coastal counties, and 4. in general, northern counties versus southern counties.
34 We look forward to continued improvement to the models Ensuring the effects of storm surge and wave action are completely excluded from wind insurance models Building vulnerabilities used in models for each region are updated for accuracy
35 FIRM Request Require modelers to include expected flood losses in the wind model before agreeing to dramatic rate increases. This would provide for a more accurate rate charged to the insured. Seek studies to indicate the real cost of wind vs. flood for Hurricane Wilma in the Keys, and other coastal areas to assist modelers. August 23, 2011 Slide 35
36 Accurate Representation of Structures in Modeling Monroe County residences built prior to 1991 are considered weak structures in modeling for rates. This FHLPM requirement means that in the model all pre 1991 homes in the Keys are equal to weak homes on the Georgia border where buildings were not designed for many, if any, hurricanes. This does not appear to allow for sound rates. 36
37 PROFESSIONAL TEAM REPORT TO THE FLORIDA COMMISSION ON HURRICANE LOSS PROJECTION METHODOLOGY ON INQUIRIES OR INVESTIGATIONS FROM THE 2008 REPORT OF ACTIVITIES Professional Team Comments Storm Surge: The Professional Team agrees with the modelers that there is a great deal of additional information needed before the Commission creates a separate set of Water Intrusion (storm surge plus wave action) standards. Nevertheless, the issue of wind versus water damage is an important one for the evolution of the modeling process. The Commission may wish to schedule future workshops to pursue the issue of advancing the process whereby the temporal effects of wind versus water damage may be appropriately considered in acceptable models.
38 PT Report 2009: Modelers recommend rather than creating a Storm Surge Standard, the Commission should be prepared for an entire new set of Storm Surge standards. Storm Surge losses should be completely separated from wind losses. Modelers currently account for the temporal effects of storm surge versus wind damage through validations with insurer claims data. To more scientifically account for the temporal effects of wind versus storm surge is currently a computationally difficult process and may be cost prohibitive for the modelers submitting to the Commission. Models are currently in an awkward position as insurance claims relating to wind versus water are frequently determined in judicial proceedings.
39 FIRM Request Require modelers to upgrade the Base Case for modeling for Monroe County, which is not accurate, to one that is to obtain accurate rates. We understand that this is difficult for actuaries. However, it is difficult for insured's to earn a salary to pay the bloated rates. August 23, 2011 Slide 39