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LESSONS FROM HURRICANE SANDY Mark Bove, CPCU, ARe Senior Research Meteorologist IMUA Annual Meeting 21 May 2013 Source: NASA

LESSONS FROM HURRICANE SANDY · Storm History: Hurricane Sandy • October 29: Sandy turns northward, then northwest. Reaches a secondary maximum intensity of 85 kts (100 mph). Forward

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Page 1: LESSONS FROM HURRICANE SANDY · Storm History: Hurricane Sandy • October 29: Sandy turns northward, then northwest. Reaches a secondary maximum intensity of 85 kts (100 mph). Forward

LESSONS FROM HURRICANE SANDY

Mark Bove, CPCU, ARe Senior Research Meteorologist IMUA Annual Meeting 21 May 2013

Source: NASA

Page 2: LESSONS FROM HURRICANE SANDY · Storm History: Hurricane Sandy • October 29: Sandy turns northward, then northwest. Reaches a secondary maximum intensity of 85 kts (100 mph). Forward

Agenda

• Hurricane Sandy

• Storm History

• Why did Sandy become a “Superstorm”?

• Storm Impacts

• Wind

• Precipitation

• Storm Surge

• Underwriting & Catastrophe Modeling Lessons

• Application of Hurricane Deductibles

• Accuracy of Surge Modeling

• Flood Exposure Data

• Location of Contents

• Marine Exposures

Page 4: LESSONS FROM HURRICANE SANDY · Storm History: Hurricane Sandy • October 29: Sandy turns northward, then northwest. Reaches a secondary maximum intensity of 85 kts (100 mph). Forward

Storm History: Hurricane Sandy

• October 22: Tropical

Depression #18 is classified

in the south-central

Caribbean Sea. The

depression is upgraded later

that day, becoming Tropical

Storm Sandy, as it moved

slowly northward.

• October 24: Sandy begins a

period of rapid intensification.

Becomes Cat 1 hurricane

before landfall in eastern

Jamaica, then Cat 3 before

landfall over eastern Cuba.

So

urc

e: N

AS

A

So

urc

e: N

AS

A

Page 5: LESSONS FROM HURRICANE SANDY · Storm History: Hurricane Sandy • October 29: Sandy turns northward, then northwest. Reaches a secondary maximum intensity of 85 kts (100 mph). Forward

Storm History: Hurricane Sandy

• October 25-26: Sandy exits

Cuba, then passes over the

eastern Bahamas. Weakens

back into Tropical Storm due

to wind shear but storm size

increases dramatically.

• October 27-28: Sandy moves

northeastward, hundreds of

miles off the Carolina coast.

Sandy regains hurricane

intensity.

So

urc

e: N

AS

A

So

urc

e: N

AS

A

Page 6: LESSONS FROM HURRICANE SANDY · Storm History: Hurricane Sandy • October 29: Sandy turns northward, then northwest. Reaches a secondary maximum intensity of 85 kts (100 mph). Forward

Storm History: Hurricane Sandy

• October 29: Sandy turns

northward, then northwest.

Reaches a secondary

maximum intensity of 85 kts

(100 mph). Forward motion

also accelerates as storm

moves towards the coast. Wind

field continues to expand.

• Once over colder water, Sandy

starts to lose tropical

characteristics, becoming

“post-tropical” just before

landfall near Atlantic City, NJ.

So

urc

e: N

AS

A

Page 7: LESSONS FROM HURRICANE SANDY · Storm History: Hurricane Sandy • October 29: Sandy turns northward, then northwest. Reaches a secondary maximum intensity of 85 kts (100 mph). Forward

6/13/2013 7 Title of presentation and name of speaker Source: NOAA

Page 8: LESSONS FROM HURRICANE SANDY · Storm History: Hurricane Sandy • October 29: Sandy turns northward, then northwest. Reaches a secondary maximum intensity of 85 kts (100 mph). Forward

6/13/2013 8 Title of presentation and name of speaker

Page 9: LESSONS FROM HURRICANE SANDY · Storm History: Hurricane Sandy • October 29: Sandy turns northward, then northwest. Reaches a secondary maximum intensity of 85 kts (100 mph). Forward

Hurricanes off the New Jersey Coastline, 1851 - 2011

6/13/2013 9 Title of presentation and name of speaker

Sandy’s Path

Source: NOAA

Page 10: LESSONS FROM HURRICANE SANDY · Storm History: Hurricane Sandy • October 29: Sandy turns northward, then northwest. Reaches a secondary maximum intensity of 85 kts (100 mph). Forward

Why did Sandy Become a “Superstorm”?

• At landfall in New Jersey, Sandy possess some unusual path, size, and

hazard characteristics, leading the storm to be dubbed a “Superstorm”

by the media, including:

• West-northwestward motion into New Jersey coast

• Very large wind field

• Extreme storm surge in New York & New Jersey

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

meteorological meaning for this term.

• In meteorological terms, Hurricane Sandy completed a process known

as Extratropical Transition just before landfall. This resulted in the

National Hurricane Center classifying Sandy as “Post-Tropical”, which

means Sandy had become an extratropical cyclone.

Page 11: LESSONS FROM HURRICANE SANDY · Storm History: Hurricane Sandy • October 29: Sandy turns northward, then northwest. Reaches a secondary maximum intensity of 85 kts (100 mph). Forward

Extratropical Cyclones

• Low pressure center colder than

surroundings (Cold-Core Low).

• Develop in areas of temperature

gradients between differing air masses.

• Asymmetrical Shape

• Strong upper-level winds critical in

development and intensification.

Understanding Extratropical Transition:

Types of Large-Scale Storms

So

urc

e: N

AS

A

Tropical Cyclones

• Low pressure center warmer than

surroundings (Warm-Core Low).

• Develop in air masses of relatively

constant temperature and humidity.

• Symmetrical shape.

• Weak upper-level winds aloft.

So

urc

e: N

AS

A

Page 12: LESSONS FROM HURRICANE SANDY · Storm History: Hurricane Sandy • October 29: Sandy turns northward, then northwest. Reaches a secondary maximum intensity of 85 kts (100 mph). Forward

Understanding Extratropical Transition

Process of tropical cyclone becoming an extratropical (frontal) cyclone.

Usually induced when hurricanes interact with colder, drier air, jet

streams, or extratropical weather systems.

Floyd as Tropical Low Floyd as Transitioning Low

So

urc

e: N

AS

A

So

urc

e: N

AS

A

Page 13: LESSONS FROM HURRICANE SANDY · Storm History: Hurricane Sandy • October 29: Sandy turns northward, then northwest. Reaches a secondary maximum intensity of 85 kts (100 mph). Forward

6/13/2013 13 Title of presentation and name of speaker Source: NOAA/NCEP

Page 14: LESSONS FROM HURRICANE SANDY · Storm History: Hurricane Sandy • October 29: Sandy turns northward, then northwest. Reaches a secondary maximum intensity of 85 kts (100 mph). Forward

6/13/2013 14 Title of presentation and name of speaker

Page 15: LESSONS FROM HURRICANE SANDY · Storm History: Hurricane Sandy • October 29: Sandy turns northward, then northwest. Reaches a secondary maximum intensity of 85 kts (100 mph). Forward

6/13/2013 15 Title of presentation and name of speaker Source: NASA

Page 16: LESSONS FROM HURRICANE SANDY · Storm History: Hurricane Sandy • October 29: Sandy turns northward, then northwest. Reaches a secondary maximum intensity of 85 kts (100 mph). Forward

Sea Surface Temperatures, Late October 2012

6/13/2013 16 Title of presentation and name of speaker Source: NOAA

Page 17: LESSONS FROM HURRICANE SANDY · Storm History: Hurricane Sandy • October 29: Sandy turns northward, then northwest. Reaches a secondary maximum intensity of 85 kts (100 mph). Forward

Source: NOAA

Page 18: LESSONS FROM HURRICANE SANDY · Storm History: Hurricane Sandy • October 29: Sandy turns northward, then northwest. Reaches a secondary maximum intensity of 85 kts (100 mph). Forward

Why did Sandy turn West?

6/13/2013 18 Title of presentation and name of speaker Source: NOAA

Page 20: LESSONS FROM HURRICANE SANDY · Storm History: Hurricane Sandy • October 29: Sandy turns northward, then northwest. Reaches a secondary maximum intensity of 85 kts (100 mph). Forward

Sandy Impacts

Source: Munich Re

Page 21: LESSONS FROM HURRICANE SANDY · Storm History: Hurricane Sandy • October 29: Sandy turns northward, then northwest. Reaches a secondary maximum intensity of 85 kts (100 mph). Forward

Sandy Impacts - Overview

• Second largest insured loss in the United States due to a tropical cyclone

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

• Estimated economic losses of $65 bn.

• Most damaging tropical cyclone in the Northeastern United States since

the 1938 Great New England Hurricane.

• Wind damage observed across 15 states & Canadian Maritime provinces

• Record storm surges along New York and New Jersey Coastlines

causing extensive damage.

• Power outages widespread across the region due to both wind and

surge.

• Major infrastructure damage in New York City.

Page 22: LESSONS FROM HURRICANE SANDY · Storm History: Hurricane Sandy • October 29: Sandy turns northward, then northwest. Reaches a secondary maximum intensity of 85 kts (100 mph). Forward

Hurricane Sandy

Maximum 1-Minute Sustained Winds & Gusts

6/13/2013 22 Title of presentation and name of speaker Source: NOAA

Page 23: LESSONS FROM HURRICANE SANDY · Storm History: Hurricane Sandy • October 29: Sandy turns northward, then northwest. Reaches a secondary maximum intensity of 85 kts (100 mph). Forward

Examples of Sandy Wind Damage

6/13/2013 23 Title of presentation and name of speaker Source: Munich Re

Page 24: LESSONS FROM HURRICANE SANDY · Storm History: Hurricane Sandy • October 29: Sandy turns northward, then northwest. Reaches a secondary maximum intensity of 85 kts (100 mph). Forward

Examples of Sandy Wind Damage

6/13/2013 24 Title of presentation and name of speaker Source: Munich Re

Page 25: LESSONS FROM HURRICANE SANDY · Storm History: Hurricane Sandy • October 29: Sandy turns northward, then northwest. Reaches a secondary maximum intensity of 85 kts (100 mph). Forward

Hurricane Sandy

Rainfall Totals

6/13/2013 25 Title of presentation and name of speaker Source: NOAA

Page 26: LESSONS FROM HURRICANE SANDY · Storm History: Hurricane Sandy • October 29: Sandy turns northward, then northwest. Reaches a secondary maximum intensity of 85 kts (100 mph). Forward

Hurricane Sandy

Snowfall Totals

6/13/2013 26 Title of presentation and name of speaker Source: NOAA

Page 27: LESSONS FROM HURRICANE SANDY · Storm History: Hurricane Sandy • October 29: Sandy turns northward, then northwest. Reaches a secondary maximum intensity of 85 kts (100 mph). Forward

Hurricane Sandy

Storm Surge (Height above ground level)

6/13/2013 27 Title of presentation and name of speaker Source: NOAA

Page 29: LESSONS FROM HURRICANE SANDY · Storm History: Hurricane Sandy • October 29: Sandy turns northward, then northwest. Reaches a secondary maximum intensity of 85 kts (100 mph). Forward

Hurricane Sandy

Storm Surge Damage

6/13/2013 29 Title of presentation and name of speaker

Page 30: LESSONS FROM HURRICANE SANDY · Storm History: Hurricane Sandy • October 29: Sandy turns northward, then northwest. Reaches a secondary maximum intensity of 85 kts (100 mph). Forward

Hurricane Sandy

Storm Surge Damage

6/13/2013 30 Title of presentation and name of speaker Source: Munich Re

Page 31: LESSONS FROM HURRICANE SANDY · Storm History: Hurricane Sandy • October 29: Sandy turns northward, then northwest. Reaches a secondary maximum intensity of 85 kts (100 mph). Forward

Hurricane Sandy

Storm Surge Damage

6/13/2013 31 Title of presentation and name of speaker Source: Munich Re

Page 32: LESSONS FROM HURRICANE SANDY · Storm History: Hurricane Sandy • October 29: Sandy turns northward, then northwest. Reaches a secondary maximum intensity of 85 kts (100 mph). Forward

Underwriting and Cat Modeling Lessons From Sandy

Source: Carl Hedde / Used with Permission

Page 33: LESSONS FROM HURRICANE SANDY · Storm History: Hurricane Sandy • October 29: Sandy turns northward, then northwest. Reaches a secondary maximum intensity of 85 kts (100 mph). Forward

Lessons from Sandy:

Hurricane Deductibles

• Designed to reduce insurance costs for consumers by requiring a higher

deductible for rare, but extreme loss events, like hurricanes.

• Each state can independently define how a hurricane deductible is

triggered in their state.

• “Named Storm” – Any storm named by the National Hurricane

Center

• Hurricane – Any storm classified as a hurricane at landfall by the

National Hurricane Center

• Variations: Only Cat 2 & Above, etc.

• Storm must make direct landfall over the state.

Page 34: LESSONS FROM HURRICANE SANDY · Storm History: Hurricane Sandy • October 29: Sandy turns northward, then northwest. Reaches a secondary maximum intensity of 85 kts (100 mph). Forward

Lessons from Sandy:

Hurricane Deductibles

Source: State of New Jersey

Page 35: LESSONS FROM HURRICANE SANDY · Storm History: Hurricane Sandy • October 29: Sandy turns northward, then northwest. Reaches a secondary maximum intensity of 85 kts (100 mph). Forward

Lessons from Sandy:

Hurricane Deductibles

• For two consecutive years, borderline-hurricane events have made

landfall in the northeast, but hurricane deductibles haven’t been allowed to

be applied.

• This means that the modeling assumption of using a hurricane

deductible for weak Cat 1 hurricanes or transitioning storms may be

incorrect.

• This practice artificially reduces the loss costs for portfolios because

the fire deductible isn’t used in the modeling.

• Currently, some models typically only accept one deductible type per peril.

• Do we ask for wind and fire deductibles in data submissions?

• For which storms in the event set should the fire deductible be used

with?

Page 36: LESSONS FROM HURRICANE SANDY · Storm History: Hurricane Sandy • October 29: Sandy turns northward, then northwest. Reaches a secondary maximum intensity of 85 kts (100 mph). Forward

Lessons from Sandy:

Storm Surge Modeling

Flooded areas in New York

by hurricane category

(SSHS)

Category 1

Category 2

Category 3

Category 4

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

Surge is only partially

dependent on storm

intensity. Do the models

reflect that large surges

can be generated by

weaker hurricanes or

storms undergoing

transition?

Page 37: LESSONS FROM HURRICANE SANDY · Storm History: Hurricane Sandy • October 29: Sandy turns northward, then northwest. Reaches a secondary maximum intensity of 85 kts (100 mph). Forward

Lessons from Sandy:

Flood Exposure Data

• There are no statistical inland flood models available for the United

States (coastal surge modeling exists), largely due to the fact that most

flood risks in the US are federally insured via the NFIP.

• Historically, there has been low demand by model clients to develop

these models.

• Developing an inland flood model would be a huge project, taking

modeling companies years to develop.

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

industry significantly lags data capture for other perils.

• Current modeling of flood risks for surge, when known, is also limited by

ability of models to handle flood sublimits and accurately determine

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

Page 38: LESSONS FROM HURRICANE SANDY · Storm History: Hurricane Sandy • October 29: Sandy turns northward, then northwest. Reaches a secondary maximum intensity of 85 kts (100 mph). Forward

Lessons from Sandy:

Location of Contents

• The location of contents within an insured location is critical when

assessing flood loss potential, particularly for commercial and industrial

risks.

• Examples:

• Hospitals (MRIs, CAT Scan Machines, Radiology equipment)

• Office Buildings (Electrical and IT equipment, etc.)

• Specialty businesses (Art Galleries)

• Models tend to spread out contents value over the number of stories

within a building. This could lead to an underestimation of the amount of

contents at risk to flood losses.

Page 39: LESSONS FROM HURRICANE SANDY · Storm History: Hurricane Sandy • October 29: Sandy turns northward, then northwest. Reaches a secondary maximum intensity of 85 kts (100 mph). Forward

Lessons from Sandy:

Impact to Marine Industry

• Inland/Ocean Accumulation Risks

• Ports and stevedore operations exposed to significant storm surge

• Chelsea art district flood and storm surge exposure

• Are cargo/transit policy occurrence limits adequate?

• Warehouses

• Flood maps are inaccurate – location and aggregation issues

• How cargo is stored matters

• Yachts & Marinas

• Haul-outs caused more damage than proper mooring in place

• Pilings too short

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

Page 41: LESSONS FROM HURRICANE SANDY · Storm History: Hurricane Sandy • October 29: Sandy turns northward, then northwest. Reaches a secondary maximum intensity of 85 kts (100 mph). Forward

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

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

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

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

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

to determine the applicability of any particular contract language to the reader's specific circumstances.

Source: NASA