The Challenge of Communicating Flood Risk

Transcription

1 The Challenge of Communicating Flood Risk 2006 National Flood Conference National Flood Insurance Program May 9, 2006 Robert P. Hartwig, Ph.D., CPCU, Senior Vice President & Chief Economist Insurance Information Institute 110 William Street New York, NY Tel: (212) Fax: (212)

2 Presentation Outline The Media & Flood Insurance Flood Facts Review The Flood Insurance Purchase Decision Summary of I.I.I. Actions to Promote Flood Awareness, Preparedness & Flood Insurance QUESTIONS What Should Have Been Done to Communicate Flood Risk Pre-Katrina? What Should be Done to Communicate Risk & Reduce Loss Going Forward? APPENDIX 1: Key Flood Program Statistics APPENDIX 2: Key Hurricane Statistics

3 The Media & Flood Insurance Better Late than Never

4 Property Damage from Hurricane Katrina Flood & Storm Surge ($ Millions)* MS Storm Surge Loss, $4,400, 10.0% AL Storm Surge Loss, $793, 1.8% FL Storm Surge Loss, $32, 0.1% Hurricane Katrina caused $44 billion in flood and storm surge damage, most of it uninsured, 88.1% of it in Louisiana LA Storm Surge Loss, $16,200, 36.8% New Orleans Flood Loss, $22,600, 51.3% *Value of property damage by flood and storm surge whether or not insured. Source: AIR Worldwide, September 29, 2005.

5 Media Coverage of Flood Insurance, E* State E LA ,518 MS FL NY US* 1,961 1,882 1,919 2,177 2,994 4,647 5,772 US-All Print Media** 2,761 2,714 3,128 3,368 6,377 10,526 13,242 *Newspaper coverage as of May 8, is III estimate. **Includes newspapers, magazines, wire services, etc. Source: Insurance Information Institute analysis based on Nexis search.

6 Media Coverage of Flood Insurance in the US Overall, E* US* US-All Print Media** 14,000 12,000 10,000 8,000 6,000 4,000 2,000 1,961 2,761 US newspaper coverage of flood insurance rose an estimated 165% between 2003 and 2006 and rose 293% across all print media 1,882 2,714 1,919 3,128 2,177 3,368 2,994 6,377 4,647 10,526 13,242 5, E *Newspaper coverage as of May 8, is III estimate. **Includes newspapers, magazines, wire services, etc. Source: Insurance Information Institute analysis based on Nexis search.

7 Media Coverage of Flood Insurance in LA & MS, E* 1,600 LA MS 1,518 1,400 1,200 1, Media coverage of flood insurance in Louisiana rose an estimated 1,144% between 2003 and 2006 and 1,362% in Mississippi. Coverage rose 165% for the US overall E *Newspaper coverage as of May 8, is III estimate. Source: Insurance Information Institute analysis based on Nexis search.

8 Media Coverage of Flood Insurance in Florida, E* Media coverage of flood insurance in Florida rose an estimated 184% between 2003 and 2005 but may fall by 30% in E *Newspaper coverage as of May 8, is III estimate. Source: Insurance Information Institute analysis based on Nexis search.

9 Media Coverage of Flood Insurance in New York State, E* Media coverage of flood insurance in New York State rose an estimated 175% between 2003 and E *Newspaper coverage as of May 8, is III estimate. Source: Insurance Information Institute analysis based on Nexis search.

10 California Hazards: % People Stating Prepared/Very Prepared 60% Flood Earthquake Wildfire Slides Storms Tsunami 50% 47% 44% 44% 43% 48% 49% 42% 40% 30% 20% 27% 34% 25% 33% 18% 29% 34% 32% 22% 19% 33% 35% 17% 25% 28% 24% 33% 25% 32% 31% 34% 19% 21% 10% 0% Los Angeles Bay Area Sacramento San Diego Central Valley Source: Insurance Information Network of California Survey, February 2006.

11 The Flood Insurance Purchase & Retention Decision Flood Insurance is a Tough Sell

12 Flood Insurance in Force, March 2005-February 2006 Insurance in Force ($ Billions) $880 $860 $840 $820 $800 $780 $760 $740 $720 $700 $680 $756.7 $756.7 $768.5 $ Mar- 05 Apr- 05 Insurance in Force ($B) Number of Policies May- 05 Jun- 05 $ Jul- 05 $792.3 $ Aug- 05 Sep- 05 $ Oct- 05 $828.5 $851.5 $ NFIP policy count is up 6% Mar Feb Exposure is up 15.0% Nov- 05 Dec- 05 Jan- 06 $ Feb Policies in Force (Millions) Source: FEMA/NFIP web site accesses 5/8/06:

13 Flood Insurance Retention Rates, March 2005-February % 84.6% 88.3% 87.5% 90.8% 91.0% 91.6% 90.6% 88.8% 89.3% 92.0% 91.9% 92.1% 92.0% 93.2% 92.7% 90.6% 93.2% 93.1% 92.5% 95% 90% 85% 80% Aug-04 Sep-04 Oct-04 Nov-04 Dec-04 Jan-05 Feb-05 Mar-05 Apr-05 May-05 Jun-05 Jul-05 Aug-05 Sep-05 Oct-05 Nov-05 Dec-05 Jan-06 Feb-06 75% Flood insurance retention rates are a problem. Program lapse rate is too high. Customer acquistion is expensive. Source: FEMA/NFIP web site accesses 5/8/06:

14 NFIP Flood Policy Penetration Rates, by Region 70% 60% 50% 40% 30% 28% 61% In SFHA* Out of SFHA While nearly half of people outside SFHAs purchase flood coverage, only 1% outside SFHAs do 22% 60% 49% 20% 10% 0% 3% 0.6% 0.4% Northeast South Midwest West Overall US *Special Flood Hazard Areas. Source: The National Flood Insurance Program s Market Penetration Rate: Estimates and Policy Implications, RAND, % 1%

15 Flood Insurance Penetration Rates: Top 25 Counties/Parishes in US* JEFFERSON/LA WALTON/FL BROWARD/FL COLLIER/FL LEE/FL GALVESTON/TX GLYNN/GA ST. BERNARD/LA MIAMI-DADE/FL ORLEANS/LA CARTERET/NC ST. CHARLES/LA ST. JOHNS/FL CHARLOTTE/FL ST. TAMMANY/LA HORRY/SC INDIAN RIVER/FL BAY/FL BRUNSWICK/NC NASSAU/FL BERKELEY/SC PINELLAS/FL BRAZORIA/TX CHATHAM/GA TERREBONNE/LA Highest flood insurance penetration rates are in LA and FL, but most are underinsured 56.2% 51.6% 49.6% 48.0% 46.3% 44.4% 42.8% 42.8% 42.0% 41.9% 40.1% 84.0% 81.5% 80.0% 78.7% 77.1% 74.1% 69.6% 68.4% 68.1% 66.7% 65.9% 65.5% 62.4% 59.0% No counties in the Northeast are represented in Top 25 0% 20% 40% 60% 80% 100% *As of 12/31/05. Source: New Orleans Times-Picayune, 3/19/06, from NFIP and US Census Bureau data.

16 Flood Insurance Penetration Rates: Counties/Parishes Ranked 26-50* BALDWIN/AL SARASOTA/FL PALM BEACH/FL CHARLESTON/SC MANATEE/FL MARTIN/FL ATLANTIC/NJ LAFOURCHE/LA OKALOOSA/FL GEORGETOWN/SC FLAGLER/FL MAUI/HI LIVINGSTON/LA BREVARD/FL SUSSEX/DE VOLUSIA/FL ST. LUCIE/FL JEFFERSON/TX HAMPTON CITY/VA OCEAN/NJ HARRIS/TX PASCO/FL BOSSIER/LA NEW HANOVER/NC BRONX/NY Mid-Atlantic/Northeast Counties are underrepresented 28.3% 27.6% 27.0% 26.8% 26.4% 26.1% 25.4% 25.3% 25.2% 23.4% 23.3% 22.1% 21.7% 39.8% 39.7% 39.2% 39.1% 38.7% 37.2% 36.5% 36.2% 34.2% 33.0% 32.1% 30.6% People along the eastern seaboard have not gotten the message 0% 10% 20% 30% 40% 50% *As of 12/31/05. Source: New Orleans Times-Picayune, 3/19/06, from NFIP and US Census Bureau data.

17 Flood Insurance Penetration Rates: Counties/Parishes Ranked 51-75* CAMERON/TX FORT BEND/TX SANTA ROSA/MS HARRISON/MS JACKSON/MS NORFOLK CITY/VA HILLSBOROUGH/FL LAFAYETTE/LA EAST BATON ROUGE/LA VIRGINIA BEACH ESCAMBIA/FL HONOLULU/HI SACRAMENTO/CA CALCASIEU/LA MONTGOMERY/TX CITRUS/FL MERCED/CA CHESAPEAKE, OSCEOLA/FL HUDSON/NJ DUVAL/FL BARNSTABLE/MA MARIN/CA TULARE/CA MONMOUTH/NJ 11.7% 11.6% 11.3% 10.2% 9.3% 9.1% 8.5% 16.7% 16.3% 15.8% 15.6% 15.4% 14.5% 14.0% 13.3% 12.9% 12.6% 21.6% 20.9% 20.1% 19.1% 18.3% 17.8% 17.7% 17.5% MS coastal counties rank abysmally low Barnstable is only county in all of New England among Top 75 0% 5% 10% 15% 20% 25% *As of 12/31/05. Source: New Orleans Times-Picayune, 3/19/06, from NFIP and US Census Bureau data.

18 Proportion of Homes Buying Flood Insurance by No. of Homes in SFHA* 70% 60% 50% 40% 30% 20% 10% 0% Communities with few SFHAs are the most likely to not buy flood insurance 16% 56% 66% Under ,000 More Than 5000 *Special Flood Hazard Areas. Source: The National Flood Insurance Program s Market Penetration Rate: Estimates and Policy Implications, RAND, 2006.

19 Factors Influencing NFIP Flood Penetration Rates Price Change in Price Number of Homes in a Community s Special Flood Hazard Area (SFHA) Mandatory purchase requirements less vigorously enforced in communities with fewer structures in SFHAs Questions about enthusiasm in selling or knowledge of agents regarding program Coastal Flooding Potential Penetration rate much higher for coastal communities subject to flooding versus those that are not (63% vs. 35%) Mandatory Purchase Requirement Source: The National Flood Insurance Program s Market Penetration Rate: Estimates and Policy Implications, RAND, 2006.

20 Reasons Why People Buy Flood Insurance Agent/Broker Recommendation, 20% House Near Body of Water, 24% Not Near Water, But Don't Want to Take Chances, 29% Risk aversion and compulsion are the two most important direct factors influencing the purchase decision. Educational attainment & income are also factors. Mortgage Lender Requirement, 27% Source: Poll of 700 conducted by Opinion Research Corporation by Chubb Group of Insurance Companies, summarized in March 2006 press release Katrina Doesn t Motivate Many Homeowners to Protect Their Investment.

21 Additional Factors Influencing NFIP Flood Penetration Rates Education/Income of Homeowner Tendency to Decline Most Optional Coverages Only 13% of CA homeowners buy earthquake insurance Lack of Understanding of Actual Risk Most people do not understand the meaning or implications of 1-in-100 year flood risk Most people have never looked at a flood map Coverage Limits (e.g., $250K cap) Expectation of Post-Event Aid Potentially a more important factor for future events Litigation Suggesting that Flood is Covered Under Standard Homeowners Insurance Policies MS Attorney General Hood, Attorney Richard Scruggs, etc. Source: Insurance Information Institute

22 Percentage of California Homeowners with Earthquake Insurance, * 35% 30% 25% 20% 15% 32.9% 33.2% Selling any type of voluntary catastrophe insurance is tough. The vast majority of California homeowners forego earthquake coverage & play Russian Roulette with their most valuable asset. 19.5% 17.4% 16.8% 15.7% 15.8% 14.6% 13.3% 13.8% 10% 5% 0% *Includes CEA policies beginning in Source: California Department of Insurance; Insurance Information Institute.

23 I.I.I. Actions to Promote Flood Risk Awareness & Preparedness

24 Refer people/media to NFIP resources. Echo message that everyone is at risk.

25 I.I.I. Initiatives on Flood Insurance Thousands of Media Interviews Stressing importance of purchasing flood Providing media with key information Video News Release (VNR) on Flood Insurance Pre-packaged segment for new broadcasts (needs update) VNR on Hurricane Preparedness VNR on Disaster Preparedness Presentations to Agents, Insurer Groups & Others Potentially a more important factor for future events Testimony before regulatory/legislative bodies Home Inventory Software (FREE!!) Download at Northeast Insurance Summit: July 19, 2006 in NYC

26 Source: Insurance Information Institute

27 What Should & Could be Done? Lessons from the Past

28 What Should Have Been Done Pre-Katrina: Carrots or Sticks? Levees should have been strengthened or land use policies revised decades ago Offer incentives to mitigate many years ago Levees and homes/businesses Would have been cost effective Update of flood maps Actuarially sound rates Send Market Signal on Risk Stop subsidizing coastal development; burdening taxpayers Reduce lapse rates: Keep the customers you have! Experience: Stepped-up marketing is of limited value Expand Mandatory Purchase Requirement??? Require written affirmation if flood is declined with waiver of rights to federal and state aid???

29 What Can be Done? Pick the Low Hanging Fruit First Target communities with small numbers of structures in Special Flood Hazard Areas (SFHAs) Target inland communities vs. coastal: More Potential Increase coverage carried by coastal dwellers Increase compliance with mandatory purchase requirement Expand Mandatory Purchase Requirement??? Expand mandate beyond 1-in-100 year flood plain?? Make coverage mandatory irrespective of mortgage status?? Source: The National Flood Insurance Program s Market Penetration Rate: Estimates and Policy Implications, RAND, 2006; Insurance Information Institute.

30 APPENDIX 1 Flood Facts Key Flood Program Statistics

31 NFIP: Policies in Force and Total Coverage (Exposure) Policies in Force Total Coverage (Exposure) Policies in Force (Millions) Nearly 5 million property owners per year buy NFIP policies The NFIP insured property with a total value of $870.2 billion as of Feb * Feb- 06 $1,000 $900 $800 $700 $600 $500 $400 $300 $200 Total Coverage ($ Billions) *As of December Sources: FEMA, National Flood Insurance Program (NFIP)

32 NFIP: Total Policies in Force by Calendar Year, 1978-Feb Nearly 5 million property owners per year buy NFIP policies Millions * Feb-06 No. of Policies (Millions) *As of December 2005 Source: FEMA, National Flood Insurance Program (NFIP)

33 NFIP: Total Premium by Calendar Year 1978-Feb $0.11 $0.14 $0.16 $0.26 $0.35 $0.38 $0.42 $0.45 $0.52 $0.57 $0.59 $0.63 $0.67 $0.74 $0.80 $0.89 $1.00 $1.14 $1.28 $1.51 $1.67 $1.72 $1.72 $1.74 $1.80 $1.90 $2.05 $2.23 $2.5 $2.0 $1.5 $1.0 $0.5 $0.0 The NFIP now collects more than $2.2 billion annually in premiums $ Billions Feb-06 Source: FEMA, National Flood Insurance Program (NFIP)

34 NFIP: Total Coverage (Exposure) by Calendar Year 1978-Feb $50.5 $74.4 $99.3 $102.1 $107.3 $117.8 $124.4 $139.9 $155.7 $165.1 $175.8 $265.2 $213.6 $223.1 $236.8 $267.9 $295.9 $349.1 $400.7 $462.6 $497.6 $534.1 $567.6 $611.9 $653.8 $691.8 $764.5 $851.5 $870.2 $1,000 $900 $800 $700 $600 $500 $400 $300 $200 $100 $0 $ Billions The NFIP insured property with a total value of $870.2 billion as of Feb * Feb-06 *As of December Source: FEMA, National Flood Insurance Program (NFIP)

35 NFIP: Policies in Force By Coverage Type (As of July 31, 2005) Building Coverage Only, 39.7% Both Bldg. & Cont. Cvg, 58.7% Contents Coverage Only, 1.5% Coverage Type Building Coverage Only Contents Coverage Only Both Bldg & Cont Cvg All Policies Policies in Force 1,845,481 72,008 2,729,267 4,646,756 Source: FEMA, National Flood Insurance Program (NFIP)

36 NFIP: Policies in Force By Occupancy Type (As of July 31, 2005) Condos 20.5% Other Residential 3.0% Non- Residential 4.6% 2 to 4 Family Unit 3.4% Single Family Home 68.5% Occupancy Type Single Family Home 2 to 4 Family Unit Condominiums Other Residential Non-Residential Unknown Occupancy All Policies Policies in Force 3,184, , , , , ,646,756 Source: FEMA, National Flood Insurance Program (NFIP)

37 NFIP: No. of Losses Paid by Calendar Year No. of Losses 29,122 70,613 41,918 23,261 32,831 51,584 27,688 38,675 13,789 13,399 7,758 36,247 14,766 28,554 44,651 36,044 21,583 62,440 52,678 30,333 57,338 47,220 16,347 43,503 25,220 36,271 37, Source: FEMA, National Flood Insurance Program (NFIP)

38 NFIP: Loss Dollars Paid by Calendar Year $1,400 $1,200 $1,000 $800 $600 $400 $200 $0 The NFIP will pay an estimated $10 billion in flood claims in 2005, indicating a need for a taxpayer-financed bailout of at least $7.5 billion $ Millions $147.7 $483.3 $230.4 $127.1 $198.3 $439.5 $254.6 $368.2 $126.4 $105.4 $51.0 $661.7 $167.9 $353.7 $710.2 $659.1 $411.1 $1,295.5 $828.0 $519.5 $886.0 $754.8 $251.5 $1,276.4 $432.5 $759.8 $1, Source: FEMA, National Flood Insurance Program (NFIP)

39 Average Premium Preferred Risk Policy* For Buildings with Basement Under NFIP Average Premium $400 $350 $300 $250 $200 $150 $136 $162 $204 $231 $262 $278 $293 $330 $351 $100 $50 $0 $20,000 $30,000 $50,000 $75,000 $100,000 $125,000 $150,000 $200,000 $250,000 Building deductible: $500. Contents deductible: $500. Deductibles applied separately. *Under the NFIP a low-cost Preferred Risk Policy is available to homeowners located in low- to moderaterisk areas. Sources: FEMA, National Flood Insurance Program (NFIP)

40 Average Premium Average Premium Preferred Risk Policy* For Buildings without Basement Under NFIP $350 $300 $250 $200 $179 $206 $232 $248 $263 $295 $316 $150 $100 $111 $137 $50 $0 $20,000 $30,000 $50,000 $75,000 $100,000 $125,000 $150,000 $200,000 $250,000 Building deductible: $500. Contents deductible: $500. Deductibles applied separately. *Under the NFIP a low-cost Preferred Risk Policy is available to homeowners located in low- to moderaterisk areas. Sources: FEMA, National Flood Insurance Program (NFIP)

41 Total Claim Payments by State (Top 11) Jan 1, Dec $3,000 $2,500 $2,000 $1,500 $ Millions $2,702.0 $2,226.7 $1,727.3 Louisiana and Alabama rank 3 rd and 10 th respectively in terms of total claims payments. Mississippi ranks 11 th. $1,000 $500 $687.2 $598.2 $473.4 $422.6 $419.9 $384.4 $377.8 $276.6 $0 TX FL LA NC NJ PA SC MO VA AL MS Source: FEMA, National Flood Insurance Program (NFIP)

42 $16,000 $14,000 $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 $0 Total Claim Payments by State (Top 11) Jan 1, Feb $14,309.1 $3,228.8 $ Millions $2,775.0 $2,554.6 Louisiana and Mississippi rank 1 st and 4 th respectively in terms of total claims payments (up from 3 rd and 11 th pre-katrina). Florida ranks 2 nd and Texas 3 rd. $851.6 $721.2 LA FL TX MS AL NC NJ PA NY SC CA $655.2 $600.0 $426.0 $425.5 $423.2 Source: FEMA, National Flood Insurance Program (NFIP)

43 APPENDIX 2 Catastrophe Facts Key Hurricane Statistics

44 *Excludes $4B-$6b offshore energy losses from Hurricanes Katrina & Rita. Note: 2001 figure includes $20.3B for 9/11 losses reported through 12/31/01. Includes only business and personal property claims, business interruption and auto claims. Non-prop/BI losses = $12.2B. Source: Property Claims Service/ISO; Insurance Information Institute U.S. Insured Catastrophe Losses ($ Billions)* $120 $100 $80 $60 $ Billions 2005 was by far the worst year ever for insured catastrophe losses in the US, but the worst has yet to come. $100 Billion CAT year is coming soon $57.7 $100 $40 $20 $0 $7.5 $2.7 $4.7 $22.9 $5.5 $16.9 $8.3 $7.4 $2.6 $10.1 $8.3 $4.6 $26.5 $5.9 $12.9 $

45 Global Number of Catastrophic Events, The number of natural and man-made catastrophes has been increasing on a global scale for 20 years Record 248 manmade CATs & record 149 natural CATs in Natural catastrophes Man-made disasters Man-made disasters: without road disasters. Source: Swiss Re, sigma No. 1/2005 and 2/2006.

46 Insured Property Catastrophe Losses as % Net Premiums Earned, E 16% 14% 12% 10% 8% 6% 4% 2% US Worldwide US average: US CAT losses were a record 13.8% of net premiums earned in 2005 and were 4.2 times the average of 3.3% 0% E *Insurance Information Institute figure of 13.8% for 2005 based estimated 2005 DPE of $417.7B and insured CAT losses of $57.7B. Sources: ISO, A.M. Best, Swiss Re Economic Research & Consulting; Insurance Information Institute.

47 2005 Was a Busy, Destructive, Deadly & Expensive Hurricane Season All 21 names were used for the first time ever, so Greek letters were used for the final 6 storms: Alpha though Zeta Source: WeatherUnderground.com, January 18, set a new record for the number of hurricanes & tropical storms at 27, breaking the old record set in 1933.

48 *Figure for 2000s is extrapolated based on data for (6 major storms: Charley, Ivan, Jeanne (2004) & Katrina, Rita, Wilma (2005)). Source: Tillinghast from National Hurricane Center: Number of Major (Category 3, 4, 5) Hurricanes Striking the US by Decade 1930s mid-1960s: Mid-1990s 2030s? Period of Intense Tropical Cyclone Activity New Period of Intense Tropical Cyclone Activity Tropical cyclone activity in the mid-1990s entered the active phase of the multi-decadal signal that could last into the 2030s Already as many major storms in as in all of the 1990s 1900s 1910s 1920s 1930s 1940s 1950s 1960s 1970s 1980s 1990s 2000s

49 Sources: ISO/PCS; Insurance Information Institute. Top 10 Most Costly Hurricanes in US History, (Insured Losses, $2005) $45 $40 $35 $30 Seven of the 10 most expensive hurricanes in US history occurred in the 14 months from Aug Oct. 2005: $40.0 $ Billions $25 $20 $15 $10 $5 Katrina, Rita, Wilma, Charley, Ivan, Frances & Jeanne $3.5 $3.8 $4.8 $5.0 $6.6 $7.4 $7.7 $9.4 $21.6 $0 Georges (1998) Jeanne (2004) Frances (2004) Rita (2005) Hugo (1989) Ivan (2004) Charley (2004) Wilma (2005) Andrew (1992) Katrina (2005)

50 Insured Loss & Claim Count for Major Storms of 2005* Insured Loss Claims Insured Loss ($ Billions) $ $ $ $ $ $ $ $ $5.000 $0.000 Hurricanes Katrina, Rita, Wilma & Dennis produced a record 3.3 million claims 104 $ $5.0 1,025 $9.4 1,752 $38.1 2,000 1,800 1,600 1,400 1,200 1, Claims (thousands) Dennis Rita Wilma Katrina Size of Industry Loss ($ Billions) *Property and business interruption losses only. Excludes offshore energy & marine losses. Source: ISO/PCS as of February 8, 2006 for Dennis, Rita, Katrina and March 27, 2006 for Wilma; Insurance Information

51 Inflation-Adjusted U.S. Insured Catastrophe Losses By Cause of Loss, ¹ Earthquakes 4 8.4% Winter Storms 9.7% Wind/Hail/Flood 5 3.4% Terrorism 9.7% Civil Disorders 0.5% Fire 6 2.9% Water Damage 0.2% Utility Disruption 0.1% All Tropical Cyclones % Tornadoes % Insured disaster losses totaled $221.3 billion from (in 2004 dollars). After 2005 season, tropical cyclones will account for about 45% of the total. 1 Catastrophes are all events causing direct insured losses to property of $25 million or more in 2004 dollars. Catastrophe threshold changed from $5 million to $25 million beginning in Adjusted for inflation by the III. 2 Excludes snow. 3 Includes hurricanes and tropical storms. 4 Includes other geologic events such as volcanic eruptions and other earth movement. 5 Does not include flood damage covered by the federally administered National Flood Insurance Program. 6 Includes wildland fires. Source: Insurance Information Institute estimates based on ISO data.

52 The 2006 Hurricane Season: Preview to Disaster?

53 Outlook for 2006 Hurricane Season Average* F Named Storms Named Storm Days Hurricanes Hurricane Days Intense Hurricanes Intense Hurricane Days Net Tropical Cyclone Activity 100% 275% 195% *Average over the period Source: Dr. William Gray, Colorado State University, April 4, 2006.

54 Probability of Major Hurricane Landfall (CAT 3, 4, 5) in 2006 Entire US Coast Average* 52% 2006F 81% US East Coast Including Florida Peninsula 31% 64% Gulf Coast from FL Panhandle to Brownsville, TX 30% 47% ALSO Above-Average Major Hurricane Landfall Risk in Caribbean for 2006 *Average over past century. Source: Dr. William Gray, Colorado State University, April 4, 2006.

55 Hurricanes Katrina, Rita & Wilma: Their Place in History

56 Hurricane Katrina Insured Loss Distribution by State ($ Millions)* Florida, $543.0, 1.4% Alabama, $1,102, 2.9% Mississippi, $12,105, 31.8% Total Insured Losses = $ Billion Tennessee, $59.0, 0.2% Georgia, $27.0, 0.1% Louisiana accounted for 64% of the insured losses paid and 56% of the claims filed Louisiana, $24,275, 63.7% *As of February 8, 2006 Source: PCS division of ISO.

57 Hurricane Katrina Loss Distribution by Line ($ Billions)* Total insured losses are estimated at $38.1 billion from million claims. Excludes $2- $3B in offshore energy losses Commercial Property & BI, $18,278.0, 48% Vehicle, $2,139.0, 6% Homeowners, $17,694.0, 46% *As of February 8, 2006 Source: PCS division of ISO.

58 Hurricane Katrina Claim Count Distribution by State* Florida, 115,000, 6.6% Alabama, 124,000, 7.1% Tennessee, 15,000, 0.9% Georgia, 7,800, 0.4% Mississippi, 515,000, 29.4% Total # Claims = 1,751,800 *As of February 8, 2006 Source: PCS division of ISO. Louisiana, 975,000, 55.7% Louisiana accounted for 64%of insured losses paid and 56% of claims filed

59 Hurricane Rita Loss Distribution, by Line ($ Millions)* Total insured losses are estimated at $5.0 billion (excl. offshore energy of $2-$3B) from 381,000 claims. *As of February 8, 2006 Source: PCS division of ISO. Commercial Property & BI, $1,846.2, 37% Homeowners, $2,944.0, 59% Vehicles, $186.0, 4%

60 Hurricane Rita Claim Count Distribution by State* Alabama, 5,000, 1.3% Arkansas, 5,500, 1.4% Florida, 6,000, 1.6% Mississippi, 7,000, 1.8% Texas, 169,000, 44.4% Total # Claims = 381,000 Tennessee, 3,500, 0.9% Louisiana, 185,000, 48.6% Louisiana accounted for 48.6% of the insured losses, Texas 44.4%. Excludes offshore energy losses of $2-3B *As of February 8, 2006 Source: PCS division of ISO.

61 Hurricane Wilma Loss Distribution by Line ($ Millions)* Commercial Property & BI, $2,000, 21% Total insured losses are estimated at $9.35 billion from million claims Vehicle, $750, 8% Homeowners, $6,600, 71% *As of March 27, All losses are in FL. Source: PCS division of ISO.

62 Hurricane Wilma Claim Count Distribution by Line ($ Millions)* Total insured losses are estimated at $9.35 billion from million claims Homeowners, 680,000, 66% Commercial Property & BI, 80,000, 8% Vehicle, 265,000, 26% *As of March 27, All losses are in FL. Source: PCS division of ISO.

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