Caribbean Catastrophes and the Market

Caribbean Catastrophes and the MarketCaribbean Catastrophes and the Market

Laurie A. JohnsonLaurie A. Johnson

May 17, 2005May 17, 2005

© 2005 Risk © 2005 Risk Management Solutions, Management Solutions, Inc.Inc.

ConfidentialConfidential

AgendaAgenda

RMS CAT Modeling in the CaribbeanRMS CAT Modeling in the Caribbean 2004 CAT Response and Activities to Date2004 CAT Response and Activities to Date Evaluating the Caribbean Hurricane Model PerformanceEvaluating the Caribbean Hurricane Model Performance Next StepsNext Steps



Overview of Caribbean RiskOverview of Caribbean Risk

Considerable variations in risk by peril by island across the Considerable variations in risk by peril by island across the Caribbean:Caribbean:– Earthquake risk dominated by proximity to the Earthquake risk dominated by proximity to the

Caribbean plate boundaryCaribbean plate boundary– An average of 9.8 named storms form annually within An average of 9.8 named storms form annually within

the Atlantic and the Atlantic and Caribbean basins with Caribbean basins with tracks trending WNWtracks trending WNW

Considerable variation in Considerable variation in insurance practices across insurance practices across the region, including availability, the region, including availability, policy types and deductiblespolicy types and deductibles

Significant amount of risk is Significant amount of risk is transferred outside the transferred outside the region through reinsuranceregion through reinsurance



RMS Caribbean ModelsRMS Caribbean Models

Region Region PerilPeril Original Original ReleaseRelease

Last Last UpdateUpdate

ALM/DLM ALM/DLM and IFMand IFM

CaribbeanCaribbean HurricaneHurricane 19941994‡‡ 1995* 1995* 19991999++

20002000++

CaribbeanCaribbean EarthquakeEarthquake 19931993‡‡ 1995*1995*

19991999++

‡ ‡ Puerto Rico * JamaicaPuerto Rico * Jamaica++ Entire Caribbean basin Entire Caribbean basin



Caribbean Modeling and the 2004 StormsCaribbean Modeling and the 2004 Storms

0 300 600150 Miles

Saffir-Simpson Category

0

1

2

3

4

5

0 300 600150 Miles

Saffir-Simpson Category

0

1

2

3

4

5

Frances

Jeanne

CharleyIvan



Total Economic Damage in 2004 (by Country)Total Economic Damage in 2004 (by Country)

(Source: CDERA, 2004)(Source: CDERA, 2004)

Insurance Loss Estimates:Insurance Loss Estimates:

Bahamas >$600 MilBahamas >$600 Mil

Caymans >$1 BilCaymans >$1 Bil

Grenada $100 MilGrenada $100 Mil

Jamaica $500 MilJamaica $500 Mil

Dominican RepDominican Rep

Puerto RicoPuerto Rico



RMS Activities To DateRMS Activities To Date

CAT Response stochastic storm selections:CAT Response stochastic storm selections:– Post-landfall stochastic id’s issued based on best fit of Post-landfall stochastic id’s issued based on best fit of

track and central pressuretrack and central pressure– Updated stochastic id’s issued in Feb 2, with events Updated stochastic id’s issued in Feb 2, with events

providing better match of windspeeds at the exposure providing better match of windspeeds at the exposure concentration:concentration:• For Grand Bahama (Freetown) and Cayman (Georgetown) extreme For Grand Bahama (Freetown) and Cayman (Georgetown) extreme

concentration of exposure concentration of exposure • Modeled losses very sensitive to stochastic event windfield Modeled losses very sensitive to stochastic event windfield

parametersparameters

Bahamas and Caymans reconnaissanceBahamas and Caymans reconnaissance Island-specific storm surge mappingIsland-specific storm surge mapping Client claims data collection initiatedClient claims data collection initiated



Bahamas: Two Hurricanes Within 3 Weeks, Bahamas: Two Hurricanes Within 3 Weeks, September 2004September 2004



Frances Damage on Grand BahamaFrances Damage on Grand Bahama Frances crossed Grand Bahama Sept. 3Frances crossed Grand Bahama Sept. 3

– Stalled for nearly 2 days while weakening to cat 2 with Stalled for nearly 2 days while weakening to cat 2 with 103 mph (165 km/hr) sustained winds 103 mph (165 km/hr) sustained winds • 100 mph (160 km/hr) gust recorded on Grand Bahama 100 mph (160 km/hr) gust recorded on Grand Bahama

– Major north coast storm surge Major north coast storm surge High proportion island’s total insured exposure located in Freeport High proportion island’s total insured exposure located in Freeport

(pop 27,000) (west island)(pop 27,000) (west island) Widespread low-level roof damageWidespread low-level roof damage Storm surge flooding came Storm surge flooding came

from the north and inundated from the north and inundated airport, commercial and airport, commercial and residential property in northresidential property in northFreeport and alongFreeport and alongthe west endthe west end



Storm Surge Inundation zone

Jeanne Damage on AbacoJeanne Damage on Abaco

Jeanne’s eye crossed Abaco 3 weeks later on Sept. 25 Jeanne’s eye crossed Abaco 3 weeks later on Sept. 25 – Cat 2 with 103 mph (165 km/hr) sustained winds strengthening to Cat 3 Cat 2 with 103 mph (165 km/hr) sustained winds strengthening to Cat 3

as it passed north as it passed north – Storm surge from northeast inundated capital Marsh Harbour (pop Storm surge from northeast inundated capital Marsh Harbour (pop

4,000), Treasure Cay, Cherokee Bay4,000), Treasure Cay, Cherokee Bay

North coast of outer North coast of outer Cays subject to wave Cays subject to wave action and erosion action and erosion causing isolated causing isolated building collapsesbuilding collapses

Widespread low level Widespread low level roof damage, roof damage, particularly shingles particularly shingles and clay tilesand clay tiles



Bahamas InsightsBahamas Insights

Mandatory building code based on South Florida codeMandatory building code based on South Florida code Concrete block construction on the main islands with wood Concrete block construction on the main islands with wood

frame on the outer cays frame on the outer cays First major hurricane to directly hit Grand Bahama since First major hurricane to directly hit Grand Bahama since

1960s/70s development of Freeport1960s/70s development of Freeport– Roof tiles cemented to roofing-felt meant that minor Roof tiles cemented to roofing-felt meant that minor

damage required replacement of all roof covering damage required replacement of all roof covering On outer islands demand surge due to increased On outer islands demand surge due to increased

transportation and supply coststransportation and supply costs Business interruption and contents policy uptake generally Business interruption and contents policy uptake generally

low reducing insured losses compared to economic low reducing insured losses compared to economic damagedamage



Hurricane Ivan’s Path Across the CaribbeanHurricane Ivan’s Path Across the Caribbean

Impacted 5 islands in the Impacted 5 islands in the southern/eastern Caribbean southern/eastern Caribbean and 3 islands in the Northern and 3 islands in the Northern CaribbeanCaribbean

Resulted in 48 lives lost and Resulted in 48 lives lost and multi-billion damagesmulti-billion damages

Southernmost cat 4/5 stormSouthernmost cat 4/5 storm Struck Grenada directly mid-Struck Grenada directly mid-

day September 7day September 7



Ivan’s Impact on the Cayman IslandsIvan’s Impact on the Cayman Islands

Ivan tracked just 21 miles (34 km) southwest of Grand Cayman, Ivan tracked just 21 miles (34 km) southwest of Grand Cayman, borderline category 4 borderline category 4 5 , strongest winds directly over the 5 , strongest winds directly over the capital Georgetown (pop 24,000)capital Georgetown (pop 24,000)



Ivan’s Impact on the Cayman IslandsIvan’s Impact on the Cayman Islands

Max sustained windspeed (airport) 149mph (240 km/hr)Max sustained windspeed (airport) 149mph (240 km/hr) Max official gust 171mph (275 km/hr); unofficial recording Max official gust 171mph (275 km/hr); unofficial recording

190 mph (305 km/hr) on south coast190 mph (305 km/hr) on south coast Eyewall replacement as RMax jumped from 11 to 23 miles Eyewall replacement as RMax jumped from 11 to 23 miles

(18 – 37 km)(18 – 37 km) Storm surge 8 – 10 feet (2.4 – 3 m)Storm surge 8 – 10 feet (2.4 – 3 m)

– 1st storm surge from northeast1st storm surge from northeast

– 2nd from south as storm passed 2nd from south as storm passed 25% of island flooded25% of island flooded

11stst wind wind

Surge heightsSurge heights

22ndnd windwind

TrackTrack



Grand Cayman Wind DamageGrand Cayman Wind Damage Caymans adopted South Florida Building Code in 1992Caymans adopted South Florida Building Code in 1992

– Most high value buildings maintained structural integrity Most high value buildings maintained structural integrity (but were subject to some level of roofing damage) (but were subject to some level of roofing damage)

– Building destruction restricted to older poorer quality Building destruction restricted to older poorer quality buildings that were generally uninsuredbuildings that were generally uninsured

Out of nearly 90% of properties damaged, only around 5% Out of nearly 90% of properties damaged, only around 5% destroyeddestroyed



Grand Cayman Storm Surge DamageGrand Cayman Storm Surge Damage

Commercial business district in Georgetown not flooded; the Commercial business district in Georgetown not flooded; the only high exposure area that was not floodedonly high exposure area that was not flooded

Hotels concentrated along Seven Mile Beach sustainedHotels concentrated along Seven Mile Beach sustainedsignificant flood damage from first surgesignificant flood damage from first surge

– Only 25% hotel rooms restored by January 2005Only 25% hotel rooms restored by January 2005 10,000 cars flooded10,000 cars flooded Southeast facing coastlines suffered damaging wave action from Southeast facing coastlines suffered damaging wave action from

the 2the 2ndnd storm surge from the south storm surge from the south

– Many buildings demolished at South Shore Road, Bodden Many buildings demolished at South Shore Road, Bodden Town, Breakers, East EndTown, Breakers, East End



Evaluating the Caribbean Model’s PerformanceEvaluating the Caribbean Model’s Performance

Basin-wide stochastic Basin-wide stochastic tracks with realistic tracks with realistic lifetime historieslifetime histories

Models clash and risk Models clash and risk from by-passing from by-passing stormsstorms

Time-stepping Time-stepping windfield calculationswindfield calculations

Directional factors for Directional factors for surface roughness surface roughness

High-resolution High-resolution topography/land topography/land cover calculationscover calculations

Define Define HurricaneHurricane

Assess Assess Wind speedWind speed

LLOOSSSS

MD

R (

%)

MD

R (

%)

MD

R (

%)

MD

R (

%)

WindspeedWindspeedWindspeedWindspeed

CalculateCalculateDamageDamage

Regional code and Regional code and construction variationsconstruction variations

Detailed building inventoryDetailed building inventory Calibrated using claims Calibrated using claims

and engineering studiesand engineering studies



Stochastic Module RobustnessStochastic Module Robustness

RMS stochastic tracks represent the actual and potential RMS stochastic tracks represent the actual and potential correlation of risk between different regions (Clash)correlation of risk between different regions (Clash)

CAT 4/5 storms that CAT 4/5 storms that cross Grenada and cross Grenada and JamaicaJamaica

CAT 4/5 storms that CAT 4/5 storms that cross Grenada, cross Grenada, Jamaica and CaymansJamaica and Caymans

CAT 2/3 storms that CAT 2/3 storms that cross the Bahamascross the Bahamas

CAT 1/2 storms that CAT 1/2 storms that cross Barbados, cross Barbados, Puerto Rico and north Puerto Rico and north BahamasBahamas



Hazard Module Evaluation: 100-Year Return Period Hazard Module Evaluation: 100-Year Return Period Windspeeds (m/sec)Windspeeds (m/sec)

10 min winds at 10m above open water conditions; no roughness and topography factors applied.



Reconstructing Ivan’s Windfield in the CaymansReconstructing Ivan’s Windfield in the Caymans



Storm Surge Mapping: Inundation vs. Wave ActionStorm Surge Mapping: Inundation vs. Wave Action

Grand Cayman - Modeled Surge vs 3-sec WS

0

5

10

15

20

25

30

35

0 20 40 60 80 100 120 140 160 180 200 220 240 260 280

3 sec Wind Speed (mph)

Wat

er L

evel

(ft

)

Surge HT (ft)

Total Water HT(ft)

IvanIvanmid S coastmid S coast

(including waves)(including waves)



Storm Surge Modeling: Reconstructing Ivan’s Surge Storm Surge Modeling: Reconstructing Ivan’s Surge on the Caymanson the Caymans



Storm Surge – Understanding Risk by TerritoryStorm Surge – Understanding Risk by Territory

Dominican RepublicDominican Republic

The BahamasThe Bahamas

AndrosAndros

NassauNassauEleutheraEleuthera

The BahamasThe Bahamas

Population: 301,790Population: 301,790

Total Area: 13,940 sq kmTotal Area: 13,940 sq km

Highest point: Mount Alvernia, Highest point: Mount Alvernia, on Cat Island, 63 mon Cat Island, 63 m

Dominican RepublicDominican RepublicPopulation: 8,950,034 Population: 8,950,034 Total Area: 48,730 sq kmTotal Area: 48,730 sq kmHighest point: Pico Duarte 3,175 mHighest point: Pico Duarte 3,175 m



Next StepsNext Steps

DetailedDetailed post-mortem on 2004 Caribbean claims and losses: post-mortem on 2004 Caribbean claims and losses:

– Analysis by occupancy, building type, age, materials of Analysis by occupancy, building type, age, materials of construction, distance to coast, BI etc. construction, distance to coast, BI etc.

– Differentiate between flood and wind claims at high resolutionDifferentiate between flood and wind claims at high resolution

– Collect high-windspeed data useful for U.S. calibration as wellCollect high-windspeed data useful for U.S. calibration as well Initiating the 2006 Upgrade:Initiating the 2006 Upgrade:

– Residential and commercial vulnerability calibrationResidential and commercial vulnerability calibration

– Addition of Addition of storm surge modelingstorm surge modeling

– Caribbean Industry Exposure DataCaribbean Industry Exposure Data

Documents

Caribbean Catastrophes and the Market