Excess/Surplus

Buyer Beware

That property in the foothills may look enticing, but climate change is driving an increasing occurrence of mudslides.
By: | April 7, 2017 • 7 min read

The steep slopes of the Rocky Mountains and the Pacific Northwest are prime real estate. But they also host an increasingly dangerous risk: landslides.

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Landslides wreak, on average, $1 billion to $2 billion worth of damage to properties every year, destroying buildings, roads, power lines, pipelines and even entire neighborhoods.

Mudslides, one of the most common types of landslide, are caused by extreme rainfall, earthquakes, wildfires and man-made disasters. They can strike quickly and they have increased in both severity and frequency in recent years.

Among the worst affected regions are the Appalachian Mountains in the East, the central Rocky Mountains and the western Pacific Coastal Ranges. These are  home to steep and hilly areas that suffered from years of drought, experienced forest fires and then got pummeled by flash flooding.

Jonathan Godt, program coordinator, U.S. Geological Survey

One of the deadliest mudslides in U.S. history was in Oso, Wash., in 2014. That slide was caused partly by logging activities in the area. When a denuded hill collapsed after weeks of rain, the resulting slide killed 43 people and destroyed 49 homes.

Most at risk are mining and logging companies with extensive operations at mountain bases and valleys in areas prone to heavy rainfall, flooding and earthquakes.

“Most of the landslides in the U.S. over the last 25 years have been driven by rainfall,” said Jonathan Godt, program coordinator at U.S. Geological Survey (USGS).

“A combination of steep topography, abundant material on the mountainsides and heavy rainfall all converge to create the perfect storm.

“With a growing population and less space in the cities, more people are moving home or business to the mountains and are putting themselves and their properties in harm’s way, thus increasing the likelihood of landslides.”

Mudslide vs. Mudflow

Gary Marchitello, head of property for North America at Willis Towers Watson, said that mudslides are primarily caused by excessive rainfall or snowpack on a slope, or an earthquake.

“A mudslide, by definition, implies that gravity has a part to play,” he said.

“The soil is loosened by the rain or snow, or the ground shaking, and gravity does the rest.”

Marchitello said that it was important to make the distinction between mudslides and mudflow, which is caused by river overflow and would typically be covered under standard flood insurance.

“If you have either flood coverage as part of an all risk policy or you buy it as a stand-alone peril, you should be covered for mudflow,” he said.

Coverage for damage from mudslides, however, doesn’t come as standard and requires a separate earth movement policy or difference in conditions coverage from a specialty insurer.

“Clearly, if there was a seismic event that caused a movement of earth to slide down the mountain, that would be covered under these separate policies, said Marchitello.

“But then there are other circumstances where you get an excess of rain or snowfall, which may not necessarily have anything to do with the earth shaking, in which case it could fall into earth movement or flood, depending on the approximate cause.”

Duncan Ellis, U.S. property practice leader, Marsh

Where a mudslide or mudflow occurs because trees and plants were damaged in an earlier fire and the area had never previously experienced flooding or mud problems, most properties will be covered as a fire loss, he added.

Duncan Ellis, U.S. property practice leader at Marsh, said that it is important to first establish if and how mudslides are covered under an all risk policy.

“You need to read your policy carefully and understand what you are covered for, if at all, in terms of earthquake, earth movement and flood because there are a lot of nuances,” he said.

“If you have a policy that has earthquake cover, for example, I would argue mudslides and mudflows would not be covered.”

Cindy Collins, assistant vice president and program manager for alternative markets at Zurich North America, said that most E&S insurers prefer to limit additional coverage to earthquake, however, they may choose to include earth movement such as landslide, mine subsidence and earth sinking, depending on the circumstance.

“When the decision is made to provide the additional coverage, it would likely have a sublimit to apply, anywhere from $1 million to $25 million or more,” she said.

Identify and Assess Potential Magnitude of Mudslides

Marchitello said that risk managers and companies first need to identify and assess the potential magnitude of any mudslides before coming up with a risk mitigation plan.

A good resource for this, he said, is the USGS and Federal Emergency Management Agency (FEMA), which provides advice on mudslides. He also recommends enlisting the help of a civil engineering firm.

Counties affected by mudslides also carry out hazard mitigation planning and zoning, while at a state level there are geological programs, surveys and geologists available, he said.

“Clearly if you own a property at the base of a mountain you would think there is potentially a risk of a mudslide,” said Marchitello.

“Then it’s a case of carrying out your own investigation using techniques such as satellite imagery and looking at past events.”

Perhaps most importantly, companies should have an emergency and evacuation plan in place in the event of a disaster, added Marchitello.

“Short of moving your operation, there is very little you can do, however, to protect your property from a catastrophic event,” he said.

Michael Barry, vice president of media relations at the Insurance Information Institute, said that companies also need to look closely at land surveys and the property’s claims history.

“Risk managers must assess land surveys and the claim-filing histories of the properties their clients plan either to purchase, or operate their businesses on,” he said.

In terms of physical modifications to property, Timothy Chaix, president of R.E. Chaix & Associates, advised that businesses can add vegetation, or erect deflection barriers or retaining walls to divert a mudslide.

However, he warned that they would be liable if the diverted mud caused damage to a neighboring property.

“Right now, there is a tremendous amount of rain, particularly in California, and the area has become much more vulnerable to mudslides and earth movement because the ground was so dry before so it is not able to soak up the water as easily,” he said.

Landslides Being Added to Earthquake Models

Landslides have become so frequent and severe that modelers are making adjustments.

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Dr. Jayanta Guin, chief research officer at AIR Worldwide, said that the risk modeling firm recently added landslides into its earthquake model for Canada with plans to incorporate a similar component into its U.S. model this year.

The new module will cover the 48 mainland states and model damage caused by landslides resulting from earthquake ground shaking.

“Landslide risk is calculated based on a combination of slope information derived from Digital Elevation Model data, surficial and bedrock geographical features that determine how well the slope resists failure, and soil wetness, which varies depending on the time of year,” he said.

“The probability of a landslide actually occurring is then calculated based on the level of ground shaking.”

RMS also models the risk of landslides within its earthquake models.

“These models provide a landslide susceptibility class that is defined by local soil properties and the slope angle,” said Ben Reynolds, RMS specialist in earth sciences and earthquake modeling.

“This information can be used to identify more vulnerable locations, and would be automatically included as part of the earthquake risk modeling where we have identified significant risk of landslides.”

Wes Anderson, national property president at Risk Placement Services, said that combining mapping and working with FEMA to determine the property’s designated flood zone and elevation, enables businesses to decide on the appropriate insurance coverage and limits.

“The most valuable coverage you can buy is loss avoidance, especially when the catastrophic peril of landslide is the cause for discussion,” he said. &

Alex Wright is a U.K.-based business journalist, who previously was deputy business editor at The Royal Gazette in Bermuda. You can reach him at [email protected]

More from Risk & Insurance

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R&I Profile

Achieving Balance

XL Catlin’s Denise Balan stays calm and focused when faced with crisis.
By: | January 10, 2018 • 6 min read

In the high-stress scenario of kidnap or ransom, the first image that comes to mind isn’t necessarily a yoga mat — at least, not for most.

But Denise Balan, senior VP and head of U.S. kidnap & ransom, XL Catlin, who practices yoga every day, would swear by it.

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“I looked at these opposing aspects of my life,” she said. “Yoga is about focus, balance, clarity of intent. In a moment of stress, how do you respond? The more clarity and calmness you maintain, the better positioned you are to provide assistance in moments of crisis.

“Nobody wants to be speaking to a frenetic person when either dealing with a dangerous situation or planning for prevention of a situation,” she added.

“There’s a poem by [Rudyard] Kipling on that,” added Balan’s colleague Ben Tucker. “What it boils down to is: If you can remain calm, you can manage through a crisis a lot better.”

Tucker, who works side by side with Balan as head of U.S. terrorism and political violence, XL Catlin, has seen how yoga influences his colleague.

“The way Denise interacts with stakeholders in this process — she is very professional and calm in the approach she takes.”

Yin and Yang

Sometimes seemingly opposite or contrary forces may actually be complementary and interconnected. In Balan’s life, yoga and K&R have become her yin and yang.

She entered the insurance world after earning a juris doctor degree and practicing law for a few years. The switch came, she said, when Balan realized she wasn’t enjoying her time as a commercial litigator.

Denise Balan, senior VP and head of U.S. kidnap & ransom, XL Catlin

In her new role, she was able to use her legal background to manage litigation at AIG, where her transition from law to insurance took place. She started her insurance career in the environmental sector.

In a chance meeting in 2007, Balan met with crisis management underwriters who told her about kidnap and ransom products.

She was hooked.

Because of her background in yoga, Balan liked the crisis management side of the job. Being able to bring the calmness and clearness of intent she practiced during yoga into assisting clients in planning for crisis management piqued her interest.

She then joined XL Catlin in July 2013, where she built the K&R team.

As she became more immersed in her field, Balan began to notice something: The principles she learned in yoga were the same principles ex-military and ex-law enforcement practiced when called to a K&R-related crisis.

She said, “They have a warrior mentality — focus, purpose, strength and logic — and I would say yoga is quite similar in discipline.”

“K&R responders have a warrior mentality — focus, purpose, strength and logic — and I would say yoga is quite similar in discipline.” — Denise Balan, senior VP and head of U.S. kidnap & ransom, XL Catlin

Many understand yoga to be, in itself, one type of meditation, but yoga actually encompasses a group of physical, mental and spiritual practices. Each is a discipline. Some forms of yoga focus on movement and breathing, others focus on posture and technique. Some yoga is meant to relax the mind and create a sense of calmness; other yoga types make participants sweat.

After having her second child and working full-time, Balan wanted to find something physical and relaxing for herself; a friend suggested yoga. During her first lesson, Balan said she was enamored with it.

“I felt like I’d done it all my life.”

She dove into the philosophy of yoga, adopting the practice into her daily routine. Every morning, whether Balan is in her Long Island home or on a business trip, she pulls out her yoga mat to practice.

“I always travel with my mat,” she said. “Daily practice is the simplest form of connection to routine to maintain my balance — physically and mentally.”

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She said the strangest place she has ever practiced was in Lisbon. She was on a very narrow balcony with a bird feeder swarming with sparrows overhead.

After years of studying and practicing, Balan is considered a yogi — someone who is highly proficient in yoga. She attends annual retreats with her yoga group, where she is able to rejuvenate, ready to tackle any K&R event when she returns.

In 2016, Balan visited Tuscany, Italy, where she learned the practice of yoga nidra, a very deep form of meditation. It’s described as the “going-to-sleep stage” — a type of yoga that brings participants to a state of consciousness between waking and sleeping.

“It awakens a different part of your brain,” Balan commented. “Orally describing it doesn’t quite do it justice. One has to practice Nidra to fully understand the effect it has on your being.”

Keeping a level head during a crisis is key in their line of business, Tucker said. He can attest to the benefit of having a yogi on board.

“I’ve seen her run table-top exercises where there is this group of people in a room and they run an exercise, a simulation of a kidnap incident. Denise is very committed to what we’re doing,” said Tucker.

“She brings that energy. She doesn’t get flustered by much.”

Building a K&R Program

When Balan joined XL Catlin, she was tasked with creating the K&R team.

Balan during a retreat in Sicily, Italy, 2017

She spent time researching and analyzing what clients would want in their K&R coverage. What stuck out most to Balan was the fact that, in these situations, the decision to purchase kidnap and ransom cover is rarely made because of desire for reimbursement of money.

“I asked why people buy this type of coverage. The answer was for the security responders,” she said.

“These are the people who sit with the family. They’re similar to psychologists or priests,” Balan further explained. “Corporations can afford to pay ransom. They buy [K&R] because it gives them access to these trained and dedicated professionals who not only provide negotiation advice, but actually sit with a victim’s family, engaging deep levels of emotional investment.”

“I’ve learned to appreciate all moments in life — one at a time. The ability to think clearly and calmly guides my work, my practice and my personal life.” — Denise Balan, senior VP and head of U.S. kidnap & ransom, XL Catlin

Balan described these responders as people having total clarity of purpose, setting their intentions to resolve a crisis — a practice at the very heart of yoga. She knew XL Catlin’s new kidnap program would put stock in their responders.

“I’ve worked closely with the responders to better understand what they can do for our clientele. These are the people who run into danger — warrior hearts married to dedication to our clients’ best interests.”

But K&R is more than fast-paced crisis and quick thinking; Balan also spent a good deal of time writing the K&R form and getting the company’s resources in order. This was a huge task to tackle when creating the program from the ground up.

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“A lot of my day-to-day is speaking with brokers and finding ways to enhance our product,” she said.

After a few months, she was able to hire the company’s first K&R underwriter. From there, the program has grown. It’s left her feeling professionally rewarded.

“People don’t often get that opportunity to build something up from scratch,” she said. “It’s been an amazing experience — rewarding and fun.”

“She brings groups of people together,” said Tucker. “She’s created a positive environment.”

Balan’s yogi nature extends beyond the office walls, too. Her pride and joy, she said, are her kids. And while it may seem like two large parts of her life are opposite in nature, Balan’s achieved balance through her passions.

“[Yoga] has given me the ability to see beyond only one aspect of any situation” she said. “I’ve learned to appreciate all moments in life — one at a time. The ability to think clearly and calmly guides my work, my practice and my personal life.” &

Autumn Heisler is a staff writer at Risk & Insurance. She can be reached at [email protected]