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Taking action to reduce mounting hail losses Glenn McGillivray Managing Director Institute for Catastrophic Loss Reduction
October 20, 2015
ICLR ■ Mission - reduce loss of life and property caused
by severe weather and earthquakes ■ Created in 1997 by the insurance community to
confront rising disaster losses ■ Multi-disciplinary research and education
provides an essential foundation for ‘science to action’
■ 30 scientists / 100+ students / 12+ universities / 350+ research papers / $50+ million in research
■ Western University affiliated
In the media
ICLR board ■ Kathy Bardswick (Chair)
◆ President & CEO, The Co-operators Group ■ Barbara Bellissimo
◆ Chief Agent & Senior Vice President, State Farm Canada ■ Charmaine Dean
◆ Dean of Science, Western University ■ Louis Gagnon
◆ President, Service & Distribution, Intact Insurance ■ Andrew N. Hrymak
◆ Dean, Professor, Chemical and Biochemical Engineering, Western University ■ Paul Kovacs
◆ Executive Director, Institute for Catastrophic Loss Reduction ■ Sharon Ludlow
◆ President, Aviva Insurance Company of Canada ■ Sean Murphy
◆ President, Lloyd’s Canada ■ Gene Paulson
◆ President & CEO, Peace Hills Insurance ■ Brian Timney
◆ Dean of Social Science, Western University ■ Jonathan Turner
◆ Chief Financial Officer, Swiss Re ■ Phillipp Wassenberg
◆ Munich Re Canada
How does hail form?
Hail activity in Canada ■ Hail can occur in all provinces - and has -
though all of the largest storms to date have taken place in Alberta
■ May give a false sense of security that only Alberta is at risk
■ High number of hail days also in BC, and south/central Saskatchewan, and southern Manitoba and Ontario
■ Several years of fairly moderate hail losses (1980s-90s)
■ However losses have really ramped over the last few years
Hail in Canada
Hail in Canada
Top hailers in Canada ■ Calgary (1995) $74.7 million ■ Montreal (1986) $86.7 million ■ Calgary (1998) $95.6 million ■ Calgary (1996) $120.0 million ■ Quebec (2008) $137.2 million ■ Sask. (2008) $144.9 million ■ Calgary (1996) $167.7 million ■ Edmonton (2004) $198.5 million ■ Calgary (1991) $518.2 million ■ Alberta (2010) $569.6 million ■ Calgary (2012) 578.2 million ■ Airdrie (2014) $568.9 million
Hail activity in Canada
Top hailers in Canada Calgary, AB 2010
Top hailers in Canada Calgary, AB 2012
Top hailers in Canada Aidrie, AB 2014
$1.72 billion
Damage from hail ■ Smaller hail storms generally only affect
vehicles ■ Larger storms affect homes and other
structures as well ◆ Roofs ◆ Siding ◆ Windows ◆ Roof top plant (eg. HVAC etc)
■ Damage often only esthetic in nature ■ Not just the size of hailstones, but the
intensity in which they fall
Damage from hail ■ Hailstones generally get destructive when
they are about 1 inch or larger in size ■ Large hailstones have the capacity to cause
extensive damage to industrial and commercial assets, public infrastructure, trees, vegetation, crops and lifestock, vehicles and homes
■ In a large hail storm claims frequency seems to be equal between auto and property (50/50)
■ Claims severity, however, tends to be about 50% higher for property
Damage to homes ■ Roofing
◆ Majority of homes in Canada have asphalt shingle roofs (>90%) ✦ Encouraging move to metal, ceramic or rubber
will likely be met with failure ✦ Esthetic damage to metal and ceramic high
◆ Class 4 asphalt shingle roof recommended in high risk hail zones ✦ Can withstand 95% of hailstorms
◆ ASTM D 3464 rating (American Society for Testing and Materials) for shingles made in the US and imported into Canada ✦ A US rating only, not used for Canadian-made
shingles
Damage to homes ■ For a joint US/Canadian standard, see UL
2218 Impact resistance for roofing systems ■ UL 2218 involves dropping steel ball
bearings of varying sizes at height to replicate impact of hailstones
■ Class 4 indicates shingle still functional after double strike in same spot by 2 inch bearing
■ Additional cost of Class 4 shingle depends on area of roof etc., but $1,000 for average roof would be fairly accurate
◆ Could be less with insurers’ buying power
Damage to homes ■ Insurers advised to provide incentives for
Class 4 asphalt shingle roofs ■ Should replace hail damaged roofs with
Class 4 asphalt shingles ■ Building codes should require Class 4 in
high-risk hail zones ■ DO NOT confuse shingle warranties with
resiliency ◆ Warranties are just marketing devices, a
longer warranty does not equate to strength or resilience
Damage to homes ■ Other damage
◆ In very large hailers, damage is not limited to roofs, but may include damage to siding, vents, fascia, soffits, downspouts, skylights and fenestration (i.e. windows and doors)
◆ A lot of research done on roofing, very little to these other areas
◆ Virtually no IR standards exist for siding, vents, fascia, downspouts and fenestration
◆ Miami-Date rated skylights, windows and doors are possibilities, but are rated for high winds and not hail ✦ May be difficult to get in Canada
Damage to homes ■ Cement board siding a good alternative to
vinyl or aluminum siding ■ Advantage 1: No longer have to paint it
every few years as it now comes in a range of colours
■ Advantage 2: High resistance to fire, including wildfire
■ Much work needs to be done to fill the gaps in research re: vents, fascia, soffits, doors, windows etc.
Damage to vehicles ■ In moderate hailstorms, damage often
limited to glass ■ In larger hailstorms, damage to glass and
body panels
Damage to vehicles ■ Simplest and most common form of
mitigation is to keep cars under cover ■ Permanent cover
◆ Car ports ◆ Garages
■ Temporary cover ◆ Tents/fabric shade systems
■ Car blankets ◆ Impact tested? ◆ Rated? ◆ Opportunity!
Damage to vehicles ■ Insurance incentivization for owners of fleets
and large inventories of cars ◆ New car lots ◆ Used car lots ◆ Rental fleets ◆ Companies with large service fleets
■ Common in such places as Texas ■ Easier than incentivizing individual vehicle
owners
Damage to vehicles
Closed claims study ■ IBHS study of May 24, 2011 hailstorm in
Dallas-Fort Worth ■ Looked at 67,100 residential policies in 20
zip codes n DFW metroplex ◆ 6,697 had claims ◆ 6,490 of which were roofing-related (97%)
■ Metal and wood roofs had highest claim frequencies (ratio of claims to total policies)
■ Slate, wood and metal had highest average severities (ratio of damage to claims in a given category) ◆ However, small portion of the dataset compared
to asphalt shingles
Closed claims study
Roofing-related damages were the main loss driver for this event.
Distribution of claim frequencies with respect to roof covering materials.
Closed claims study ■ Important to collect and analyze larger
datasets of non-asphalt products with associated age data to further examine performance of these types of materials
■ Areas of highest hail damage did not necessarily align with radar-estimated areas of largest hail sizes
■ Could be due to differences in ages, materials, construction or sheltering of buildings
■ Broader future study needed into correlation between radar estimates of hail sizes with ground observations of actual damage
Closed claims study ■ Increasing focus on effects of aging on the
durability and performance of materials ■ Older buildings have a higher claim
frequency in a variety of natural disasters ■ Some of this may be due to improved
building codes ■ In other cases, may be due to degradation
of building materials and/or poor maintenance practices
■ Claim frequencies in this study tended to increase with the age of the home
Building codes protect homes Severe wind damage, Florida, dollars per square foot, 2004 - 2005
Closed claims study
Closed claims study ■ Importance of the roof
◆ More research needed to understand differences between functional and cosmetic damage
◆ Does cosmetic damage lead to functional damage down the road?
◆ Need to find cost effective ways to repair asphalt shingle roofs with just cosmetic damage
■ Roofing materials ◆ Need larger datasets of damage to non-asphalt roofing
products with associated age data
■ Damage locations vs. hail size estimates ◆ Need to study a future event to conduct a broader
study of the correlation of radar estimates of hail sizes with ground observations to help enhance the development of radar detection algorithms
Closed claims study
IBHS Claims Analysis Study May 24, 2011 Hailstorms in Dallas-Fort Worth http://bit.ly/1LksucR
Watching for fraud ■ Fraud can be evident with any catastrophe
claim, but particularly evident with hail claims
■ Unscrupulous contractors enhancing existing damage or manufacturing damage
■ Unscrupulous homeowners looking for a new roof etc
■ Know the signs ■ Haag ‘Composition Roofs Damage
Assessment Field Guide’ for asphalt roofs ◆ http://bit.ly/1OBGPpY
Where to go from here? ■ The need to address the problem of
mounting hail losses is acute ■ Increase in concentration of values in places
like Alberta isn’t going to go away ■ Gaps in the research need to be addressed
◆ Homes ◆ Cars (i.e. hail blankets)
■ Near-term concentration on roofing, where we know the most and where most damage occurs
■ Need to incentivize IR roofing materials ■ Push for IR requirements in building codes
Where to go from here? ■ We know what we know (eg. Roofing) ■ We know where the gaps in research are ■ We know how to fill these gaps ■ We have the research facilities and know-
how to fill these gaps ■ Need further research support
