Post-Ian Florida: Did the Insurance Market Sink or Swim? Inside Scoop from Industry Experts | Part 2

A Conversation With Jon Schneyer

In Part 2 of this episode, host Maiclaire Bolton-Smith continues the conversation with CoreLogic’s Senior Catastrophe Response Manager Jon Schneyer to explore the ongoing impact of Hurricane Ian on Florida’s insurance and reinsurance industries. In this installment, the two will talk about what the team actually saw when they went to southwestern Florida to observe the hurricane damage and how this helps improve CoreLogic models to better secure the future of homeowners and insurers that increasingly face natural hazard events due to climate change.

In This Episode:

Jon Schneyer:

Now, there were examples where people didn’t elevate their home, and you could see where the force that storm surge had was completely destroying the structure of the building.

Erika Stanley:

Welcome back to Part 2 of our miniseries, where we’re reexamining what happened to the insurance market as a result of Hurricane Ian and where we can expect to go from here. If you missed Part 1, I do recommend going back and catching up on last week’s episode.

To recap, we introduced our guest, Jon Schneyer and talked about how Hurricane Ian’s impact had surging effects on Florida legislative policy in both the insurance and reinsurance industries.

Let’s jump into it.

JS:

So to address the uninsured flood loss portion: So there will be a significant amount of the flood losses that are going to be uninsured.

Maiclaire Bolton Smith:

Right.

JS:

From what we’ve seen so far, that’s going to be mostly inland flood, so precipitation-induced inland flooding. That’s not storm surge. This is away from the point of landfall. We saw 15 to 20 inches of rain over a 24-hour period across Florida. And for riverine flooding, rivers overflowing, there’s going to be some flood damage and it might extend past the special flood hazard area. Or what we call flash flooding, especially in urban environments where there’s a lot of pavement, water can’t infiltrate the ground surface, you get flooding, and those typically aren’t captured in the Special Flood Hazard Area.

MBS:

Okay.

JS:

Now, that being said, for NFIP claims, losses in the Special Flood Hazard Area, one of the trends we’re noticing, and it’s a little different for Ian than it has been historically, is that the average severity of loss claims is higher.

So if we look at notable flood events, surge flood events in history, and we compare Ian to those, we can see that the average flood payment for Hurricane Ian… Now, we’re doing this sort of a back-of-the-envelope calculation. We’re kind of assuming that the final insured flood loss, the NFIP will be somewhere between that $3.7 billion and $5.2 billion. So let’s just say $4.5 billion.

MBS:

Okay.

JS:

And we’ve been looking at the number of claims received. FEMA provides that information in… They update it periodically, and we know that we’ve been watching the number of claims that have been received. This is received, so not paid or not. There’s not a count of if it’s paid or not, but just received. And we’ve seen the numbers start to plateau a bit around 45,000. So if we assume $4.5 billion of loss, 45,000 claims, that’s something like a $100,000 dollars per claim.

So that’s pretty substantial because if we look at the private residential wind claims, dollars paid per claim, it’s about $37,000. For flood, it’s $100,000. It’s three times as high and nearly 50% of the limit for a standard NFIP policy, which is about $250,000 on residential properties. So, we go back to comparing those to historical storms. The only one that’s higher was Katrina. Now Katrina was a surge event, but it was also a levy failure event.

MBS:

Sure, yeah. There’s a lot more going on there.

JS:

I wouldn’t quite call them apples. There’s a lot more going on. I wouldn’t quite call it apples-to-apples. It’s sort of an apple-to-crabapple comparison. But, if you look at the average of Irma, Katrina, Sandy, Michael, Ida, a number of other big flood events, that average is like $70,000, and Ian’s $100,000. So it’s up substantially on the average, and it’s getting much closer to the halfway point of that policy limit. So it’s indicative of the degree of damage from flooding from Hurricane Ian, and that’s something that we noticed that was, I wouldn’t say confirmed, but backed up by some of our observations on the ground.

ES:

To add some additional context to historic storms, CoreLogic data shows that Hurricane Harvey, which devastated the Houston area in 2017, caused an estimated $25 billion to $37 billion in damages. Hurricane Andrew, which made landfall on the coast of Florida in 1992, resulted in $25 billion in damages at the time, which is approximately $53.37 billion today, according to inflation metrics from the Bureau of Labor Statistics. Damages from Hurricane Ida were estimated to be between $27 billion and $40 billion, and Hurricane Irma saw estimated damages of between $42.5 billion and $65 billion.

MBS:

And I actually want to go exactly there on the ground. So something that we at CoreLogic did following the event is we sent a team to the impacted area in Florida to do a reconnaissance trip. So can you talk a little bit about what they saw, the purpose of their trip and just talk a little bit about what that trip looked like?

JS:

Yeah, of course. So our team went down… The Hazard HQ Reconnaissance Team went down to southwest Florida in the aftermath of Hurricane Ian and their goal was really to assess a couple of things. A: The extent of damage around the point of landfall, the types of damage — wind, flood — and the severity and the magnitude of that damage. So our team drove 350, 400 miles around southwest Florida, around the point of landfall, all the way down to Naples, up to Port Charlotte as well. And out to the islands. They didn’t quite get out to Sanibel because there was no bridge out to Sanibel.

MBS:

Oh, wow.

JS:

Unfortunately. But they did go to Fort Myers Beach as well. And what they noticed is that around the point of landfall, there was both wind and storm surge loss but the storm surge flooding damage was incredibly severe. So, I remember looking at some of the photos and notes that came back from their survey and I remember seeing one home — and I’ll describe this as best I can. But this is an oceanfront property.

So if you’re looking at… If you’re on the beach, you got the ocean right behind you and this house is right here on the beach. Very modern-looking house in terms of it was built recently. And if you look at the house after the storm, the bottom floor looks like there was nothing ever there. It’s built up on stilts, it’s got a concrete slab but it looks like… It was basically it was completely destroyed.

But there’s nothing on that floor. That floor was empty. It was garage space. It was storage. The first floor was elevated up above the damage level from Hurricane Ian, and if you look at the top two-thirds of that house, it looks virtually untouched. So it speaks to the importance of elevating your home if you’re going to live in a flood risk, storm surge risky area, but also speaks to the importance of making sure your home is built to the strictest building codes because we don’t see any damage to the roof.

There’s no shingle damage. We don’t see any damage to the windows as the importance of hurricane shutters over the doors of windows. And if you can keep the wind from coming into the envelope of your house, it’s going to keep your roof attached. That’s what happens is when windows break, air gets in, blows the roof off. So this house, the top two floors of this house looks untouched and this was at Fort Myers Beach, which was almost ground zero for this event.

The bottom floor: completely destroyed. But that was the intent. The intent was that the bottom floor to take the brunt. You don’t have much down there. It’s unfinished. So in that case, it was a success. So we saw a number of examples like that. Now there were examples where people didn’t elevate their home, and you can see where the force that storm surge had was completely destroying the structure of the building.

I remember another picture of a 7-Eleven, everyone could picture a 7-Eleven, concrete walls…and that building was… basically it was just knocked to the side. It was tilting. So the force of the water basically pushed that building over. That’s how strong the storm surge was.

MBS:

Wow. Yeah, it’s powerful.

JS:

So when we talk about… It is powerful when we talk about the severity of those flood claims, well we’re seeing a lot of complete destruction of homes from storm surge, but less so from wind. So we saw some damage related to wind. We saw some tiles that were blown off. We saw some siding damage and there were some homes where that envelope was broken and there was significant roof damage inside. But around the point of landfall, flooding was the biggest driver of damage. Granted, it’s a big storm. There’s still going to be a lot of wind claims across the state so there’s still going to be a lot of wind loss, but the severity flood was much more severe at the point of landfall.

ES:

In our last episode, we asked our listeners to tell us their stories about Hurricane Ian and their experiences with insurance in the aftermath. If you haven’t done so, we welcome you to reach out. You can leave a comment on our social media using the handle @CoreLogic on Facebook and LinkedIn or @CoreLogicInc on Twitter and Instagram. You can also leave a review on Apple Podcasts.

MBS:

Okay. No, that’s really helpful, and I appreciate you trying to paint a picture too, of everything that the team saw. And really, I guess I want to talk a little bit about too, about the purpose of these trips is really as part of validation of our models, of our loss estimates. Can you talk a little bit about any insights that the team brought back after spending this week or so in this impacted area and seeing all this damage? They didn’t just bring back a bunch of photos to show they were there. They did it for a purpose, so do you want to talk a little bit about that?

JS:

Absolutely. So the reconnaissance missions, we use that data and that information to validate our estimated losses and to improve the model. The models are always constantly improving and we’ll take those notes and we’ll make changes either to the hazard component of our model, so that’s where the water is how much water there is or the winds or the vulnerability of individual structures, how they react to certain wind speeds or flood depths. So, for coastal properties like those in Fort Myers Beach, like the one I was describing earlier, our flood model did a great job of estimating the financial impact from that peril in that area. One of our greatest strengths here at CoreLogic is the detailed property database we have. So, when we create flood footprints for Hurricane Ian, we know flood depths at every individual home, which is fantastic. But if you don’t know a lot about the individual structure, it’s hard to figure how much damage it’ll do.

So we have this incredible property database where we’ve captured things like the first-floor height or the foundation material. We use machine learning, AI algorithms to look at imagery, either that be aerial imagery, street photography imagery, satellite-derived, remotely sense data. So we know everything about the house. We do a great job of modeling the flood extent. So we’re very confident in how our damage estimation and the financial component of that model worked. So I did mention that we’re constantly updating the model. It’s not to say that we didn’t learn from Hurricane Ian. There are going to be lessons learned and we’re going to take those lessons and we’re going to help continue to develop the model.

MBS:

So I guess when we try and anticipate things going forward, we are now a couple of months, not very far, away from the start of hurricane season. And if we think about, I mean, I know we don’t quite know what to expect yet, but what do we think we’ve learned from Hurricane Ian and other events, and what do we think… What can we anticipate moving forward for storms that may happen this year, in particular with the need for additional insurance capacity from the industry?

JS:

It’s a good question, and hurricane season is always… It always feels like it’s around the corner. So, certainly one of the biggest issues in Florida for homeowners is capacity. So what needs to happen is that more insurers… somehow they need to entice insurers to start writing again in Florida for hurricanes. Now, how do we do that? Well, insurers need to make sure that they’re not going to go insolvent, so they need to be reinsurance capacity. So hopefully those new reinsurance layers that the Florida legislative branch enacted this year will help, and hopefully the reinsurance policies written for a lot of carriers that write in Florida are renewed on June 1, so hopefully they’ll see that the Jan. 1 renewals went well and that that’ll carry over to June. So, if we can increase the capacity, reinsurance capacity, insurers can keep writing and then they can continue to insure homes.

We can still be fairly certain that if we continue to build in high-risk areas, whether that be along the coast in Florida or in the Wildland-Urban Interface, if we’re talking about wildfire risk, CAT losses are going to continue to rise. Exposure growth is probably the biggest contributor to the annual economic and insured net CAT losses, and because of climate change, sea levels will be higher, storms surge will be more severe, storms will be wetter. There’s going to be more flood losses. Hopefully the secondary factors that are increasing the losses like inflation or the human element, hopefully those are going to be curved a bit more coming this year, so it’s just the insured loss from storms like Hurricane Ian. And hopefully carriers will be able to price for that accordingly and should be a lot better going forward, fingers crossed. Now what will be the final story? We don’t know, but yeah.

MBS:

Time will tell.

JS:

We’re hoping that the situation… Time will tell the situation will be a lot better.

MBS:

Yeah. Well, I have a feeling, Jon that you’re going to be back again in the next few months to talk to us again. So we love having you here at CoreLogic. We love having you on this podcast. And yeah, we’ll see how hurricane season unfolds this year but as well as any other natural hazards that may happen as well I’m sure we’ll have you back.

So, thanks so much for joining again today on Core Conversations: A CoreLogic Podcast.

JS:

Thank you so much.

MBS:

All right. And thank you for listening. I hope you’ve enjoyed our latest episode.

Please remember to leave us a review and let us know your thoughts and subscribe wherever you get your podcast to be notified when new episodes are released. And thanks to the team for helping bring this podcast to life. Producer, Jessi Devenyns, Editor and Sound Engineer, Romie Roman. Our new facts guru, Erica Stanley and Social Media Duo, Sarah Buck and Makaila Brooks.

Tune in next time for another Core Conversation.