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.


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.


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

More from Risk & Insurance

Risk Report: Marine

Crewless Ships Raise Questions

Is a remote operator legally a master? New technology confounds old terms.
By: | March 5, 2018 • 6 min read

For many developers, the accelerating development of remote-controlled and autonomous ships represents what could be the dawn of a new era. For underwriters and brokers, however, such vessels could represent the end of thousands of years of maritime law and risk management.

Rod Johnson, director of marine risk management, RSA Global Risk

While crewless vessels have yet to breach commercial service, there are active testing programs. Most brokers and underwriters expect small-scale commercial operations to be feasible in a few years, but that outlook only considers technical feasibility. How such operations will be insured remains unclear.

“I have been giving this a great deal of thought, this sits on my desk every day,” said Rod Johnson, director of marine risk management, RSA Global Risk, a major UK underwriter. Johnson sits on the loss-prevention committee of the International Union of Maritime Insurers.

“The agreed uncertainty that underpins marine insurance is falling away, but we are pretending that it isn’t. The contractual framework is being made less relevant all the time.”

Defining Autonomous Vessels

Two types of crewless vessels are being contemplated. First up is a drone with no one on board but actively controlled by a human at a remote command post on land or even on another vessel.

While some debate whether the controllers of drone aircrafts are pilots or operators, the very real question yet to be addressed is if a vessel controller is legally a “master” under maritime law.


The other type of crewless vessel would be completely autonomous, with the onboard systems making decisions about navigation, weather and operations.

Advocates tout the benefits of larger cargo capacity without crew spaces, including radically different hull designs without decks people can walk on. Doubters note a crew can fix things at sea while a ship cannot.

Rolls-Royce is one of the major proponents and designers. The company tested a remote-controlled tug in Copenhagen in June 2017.

“We think the initial early adopters will be vessels operating on fixed routes within coastal waters under the jurisdiction of flag states,” the company said.

“We expect to see the first autonomous vessel in commercial operation by the end of the decade. Further out, around 2025, we expect autonomous vessels to operate further from shore — perhaps coastal cargo ships. For ocean-going vessels to be autonomous, it will require a change in international regulations, so this will take longer.”

Once autonomous ships are a reality, “the entire current legal framework for maritime law and insurance is done,” said Johnson. “The master has not been replaced; he is just gone. Commodity ships (bulk carriers) would be most amenable to that technology. I’m not overly bothered by fully automated ships, but I am extremely bothered by heavily automated ones.”

He cited two risks specifically: hacking and fire.

“We expect to see the first autonomous vessel in commercial operation by the end of the decade. Further out, around 2025, we expect autonomous vessels to operate further from shore — perhaps coastal cargo ships. For ocean-going vessels to be autonomous, it will require a change in international regulations, so this will take longer.” — Rolls-Royce Holdings study

Andrew Kinsey, senior marine risk consultant, Allianz Global Corporate & Specialty, asked an even more existential question: “From an insurance standpoint, are we even still talking about a vessel as it is under law? Starting with the legal framework, the duty of a flag state is ‘manning of ships.’ What about the duty to render assistance? There cannot be insurance coverage of an illegal contract.”

Several sources noted that the technological development of crewless ships, while impressive, seems to be a solution in search of a problem. There is no known need in the market; no shippers, operators, owners or mariners advocate that crewless ships will solve their problems.

Kinsey takes umbrage at the suggestion that promotional material on crewless vessels cherry picks his company’s data, which found 75 percent to 90 percent of marine losses are caused by human error.


“Removing the humans from the vessels does not eliminate the human error. It just moves the human error from the helm to the coder. The reports on development by the companies with a vested interest [in crewless vessels] tend to read a lot like advertisements. The pressure for this is not coming from the end users.”

To be sure, Kinsey is a proponent of automation and technology when applied prudently, believing automation can make strides in areas of the supply chains. Much of the talk about automation is trying to bury the serious shortage of qualified crews. It also overshadows the very real potential for blockchain technology to overhaul the backend of marine insurance.

As a marine surveyor, Kinsey said he can go down to the wharf, inspect cranes, vessels and securements, and supervise loading and unloading — but he can’t inspect computer code or cyber security.

New Times, New Risks

In all fairness, insurance language has changed since the 17th century, especially as technology races ahead in the 21st.

“If you read any hull form, it’s practically Shakespearean,” said Stephen J. Harris, senior vice president of marine protection UK, Marsh. “The language is no longer fit for purpose. Our concern specifically to this topic is that the antiquated language talks about crew being on board. If they are not on board, do they still legally count as crew?”

Harris further questioned, “Under hull insurance, and provided that the ship owner has acted diligently, cover is extended to negligence of the master or crew. Does that still apply if the captain is not on board but sitting at a desk in an office?”

Andrew Kinsey, senior marine risk consultant, Allianz Global Corporate & Specialty

Several sources noted that a few international organizations, notably the Comite Maritime International and the International Maritime Organization, “have been very active in asking the legal profession around the world about their thoughts. The interpretations vary greatly. The legal complications of crewless vessels are actually more complicated than the technology.”

For example, if the operational, insurance and regulatory entities in two countries agree on the voyage of a crewless vessel across the ocean, a mishap or storm could drive the vessel into port or on shore of a third country that does not recognize those agreements.

“What worries insurers is legal uncertainty,” said Harris.

“If an operator did everything fine but a system went down, then most likely the designer would be responsible. But even if a designer explicitly accepted responsibility, what matters would be the flag state’s law in international waters and the local state’s law in territorial waters.


“We see the way ahead for this technology as local and short-sea operations. The law has to catch up with the technology, and it is showing no signs of doing so.”

Thomas M. Boudreau, head of specialty insurance, The Hartford, suggested that remote ferry operations could be the most appropriate use: “They travel fixed routes, all within one country’s waters.”

There could also be environmental and operational benefits from using battery power rather than conventional fuels.

“In terms of underwriting, the burden would shift to the manufacturer and designer of the operating systems,” Boudreau added.

It may just be, he suggested, that crewless ships are merely replacing old risks with new ones. Crews can deal with small repairs, fires or leaks at sea, but small conditions such as those can go unchecked and endanger the whole ship and cargo.

“The cyber risk is also concerning. The vessel may be safe from physical piracy, but what about hacking?” &

Gregory DL Morris is an independent business journalist based in New York with 25 years’ experience in industry, energy, finance and transportation. He can be reached at [email protected]