Flood Modeling

Comparing Flood Maps

A presentation held in London drives home the point that flood modeling has a long way to go.
By: | December 18, 2017 • 6 min read

A greater validation of inland flooding data is required to improve the accuracy of U.S. flood models.

That was one of the key conclusions from presenters at the first comparison of U.S. inland flood risk modeling of its kind hosted by Ariel Re at Lloyd’s of London in November. The event, led by Dr. Federico Waisman, senior vice president, head of analytics, Ariel Re, showcased the U.S. flood models of four leading vendors: AIR, CoreLogic, KatRisk and Impact Forecasting.

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RMS pulled out of the presentation because their model was not ready on time.

Compared to their earthquake and hurricane counterparts, flood models for U.S. risks are still in their relative infancy, relying largely on limited National Flood Insurance Program (NFIP) data. But in the wake of the devastation of thousands of homes and businesses caused by the effects of Hurricanes Harvey, Irma and Maria, the need for better flood modeling has arguably never been greater.

“Having more validation data would always be helpful,” said KatRisk’s chief technology officer and co-founder, Stefan Eppert.

“While in the U.S. we have got very good hazard data and excellent organization of data, on the loss side it would be nice to have generally agreed standards.”

Cagdas Kafali, senior vice president, research and modeling, AIR Worldwide, said there also needs to be more focus on commercial data sets.

Federico Waisman, senior vice president, head of analytics, Ariel Re

“There is some residential data available, but it’s also going to be important to validate these models’ vulnerability when it comes to the commercial risks,” he said. “The problem is that there is a lot of engineering assumptions in the absence of actual claims data.

“It’s also very difficult to get to peril-specific and coverage-specific claims when it comes to multi-location policies with sublimits. Hopefully that data will be available in the future and that will help to enhance the models.”

Risk Variety

Aon Benfield Impact Forecasting’s head of research and development, Siamak Daneshvaran, said that a bigger problem is capturing the different types of flooding risk.

“Flood risk is spread all over the country,” he said.

“It’s not only in river bank areas; you can have flood in pluvial regions that might be outside of the flood plain maps that FEMA [Federal Emergency Management Agency] is producing.

“Therefore, the models need to laser in and generate more events to define the correct flood plain maps. Also, to capture events like Hurricane Harvey, where there was a large loss in downtown Houston, we really need to understand pluvial processes, drainage and all of those issues.”

In terms of available claims data, all four models draw on NFIP data to varying degrees, the panel surmised.

CoreLogic and KatRisk both use a combination of NFIP and company claims data, while Impact Forecasting supplements that with Aon’s own data to calibrate its model.

AIR’s Kafali, however, warned that when using NFIP data, its own limits shouldn’t be used as replacement values.

“Instead, in our model, we used actual replacement values from industry exposure data,” he said. “That gave us the actual cash value policies for contents so we could model them as an exposure.

“We have also been able to push the limits by looking at the data which has come from weather factors like storm surge. That has enabled us to make a lot of assumptions on the residential side, however, the commercial data is somewhat lacking.”

Flood models

Compared on a similar basis spread across 1.2m locations nationwide, AIR’s Inland Flood Model for the U.S. registered the highest number of flooding events per year, while CoreLogic’s U.S. Inland Flood Model: RQE v17.0 posted the lowest.

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AIR also pegged the largest average annual gross loss by region at $576.4 million — 3.1 times larger than the smallest, KatRisk’s SpatialKat U.S. Inland Flood Model, at $185.1 million.

In three out of four vendors (AIR, CoreLogic and KatRisk), California accounted for the biggest loss, followed by the Ohio and Texas-Gulf regions.

Then the models were compared based on three historical scenarios: Hurricane Harvey (a precipitation event), the 2016 Louisiana flood (hurricane) and the 1993 Great Midwest flood (riverine).

“The challenge for users of these models is to interpret and make a decision about the various sciences and assumptions made to form your own view of the risk. That challenge is much greater than in other models like earthquake and hurricane where many models have been developed over the years.” — Federico Waisman, senior vice president, head of analytics, Ariel Re

CoreLogic reported the highest gross loss for Harvey at $986.4 million, closely followed by Impact Forecasting’s U.S. Inland Flood Model v11 at $915.2 million.

KatRisk and AIR were at the lower end with $591.4 million and $497.1 million respectively.

The same is true of the average claim size, with CoreLogic coming in highest at $86,431, Impact Forecasting with $44,398, KatRisk $22,467 and AIR $11,338.

That correlated with the number of claims, with AIR reporting 43,845 claims, KatRisk 26,321, Impact Forecasting 20,613 and CoreLogic 11,413.

It was a similar story for the Great Midwest flood, with CoreLogic coming in highest for losses at $741.6 million and average claim size of $55,823, while it also identified the lowest number of claims at 13,284.

However, with the Louisiana flood, the one outlier was AIR, which estimated the largest loss at $124.3 million but the smallest average claim at $4,704. It also captured the largest number of claims at 26,434.

“AIR has the lowest average claim size across all three of the historic scenarios and CoreLogic the highest,” said Waisman.

“AIR also has the largest number of claims and CoreLogic the lowest.”

Kafali said that the difference in event frequency between the models could be down to the definition of an event.

“Event definition may be one reason why we have different numbers, because we might be defining events differently,” he said.

“It’s not like with earthquake and hurricane where you have a defined scale of measurement.”

Eppert added, “By rights, the event definition should be driven by contract terms. However, this has the downside that you have got a different event set for each contract, so there’s a compromise between adequately representing the terms that you insure and being able to communicate the losses.”

Biggest Challenges

Waisman concluded that while there were many similarities between the models’ results, there were also a lot of material deviations.

“In fact, the norm tends to be more deviations than similarities,” he said.

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“The differences tend to be higher when we extend the model to its limits, like higher return periods, or under extreme circumstances, like high deductibles, where they depart the most.”

He added: “The challenge for users of these models is to interpret and make a decision about the various sciences and assumptions made to form your own view of the risk. That challenge is much greater than in other models, like earthquake and hurricane, where many models have been developed over the years.

“Flood as a peril, by contrast, is extremely complex to model. The U.S. has a variety of precipitous weather patterns and not enough claims data, but I have no doubt that all four of these vendor models will help play a part in tackling this problem.”

Head of Lloyd’s risk aggregation David Clouston concluded, “Widespread flooding as a result of windstorms Harvey and Irma has once again highlighted the costs of natural catastrophes — both in terms of human suffering and economic hardship. The need for a deeper understanding of inland flood modeling is therefore more important than ever.” &

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

Absence Management

Establishing Balance With Volunteers

It’s good business to allow job-leave for volunteer emergency responders, whether or not state laws apply.
By: | January 10, 2018 • 7 min read

If 2017 had a moniker, it might be “the year of the natural disasters,” thanks to a phenomenal array of catastrophic or severe events— hurricanes, tornadoes, wildfires, ice storms and floods.

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Combined with smaller-scale fires and other emergencies, these incidents tax the resources of local and state emergency services, often prompting the need to call volunteer emergency responders into action.

But as lean as most organizations are already running, volunteer activities can sometimes cause friction between employees and employers. Handling conflicts the wrong way can potentially lead to legal headaches, harm employee morale and batter a company’s reputation.

State by State Variations

Most employers are aware of the various federal and state leave laws protecting their employees, including family and medical leave, pregnancy leave and military leave. But leave laws that protect the livelihoods of volunteer emergency responders are more likely to fly under the radar of some HR managers and risk managers.

Such laws don’t exist in every state, but more than 20 states do have some type of law in place to protect volunteers including emergency responders, firefighters, disaster workers, medical responders, ambulance drivers or peace officers.

Marti Cardi, vice president of Product Compliance for Matrix Absence Management

The laws vary broadly. Nearly all specify that such leave be unpaid, and that employees disclose their volunteer status to employers and provide documentation for each leave. But there is a spectrum of variations in terms of what may trigger an eligible leave. Some, for instance, apply for any emergency that prompts a call from the volunteer’s affiliated responder group. Others may require a government declaration of emergency for the law to be triggered.

While many of the laws do not explicitly require employers to let employees leave work when called to an emergency during a shift, most specify that an employee may be late or even miss work entirely without facing termination or any other adverse employment action.

Some states mandate a maximum number of unpaid leave days that a volunteer can claim. But others may place more significant burdens on employers. In California, for instance, employers with 50 or more employees are required to grant up to 14 days of unpaid leave for training activities in addition to any leave taken to respond to emergency events. For multistate employers, keeping on top of what obligations may apply in each circumstance can be a challenge.

Significant Risks

Large or mid-sized employers may rely on absence management providers to keep them in compliance. For smaller employers though, it may be as simple as looking up a state’s law via Google to find out what’s required. However, checking in with the state department of labor or the company’s attorney may be the best way to get the correct facts.

“I would caution that just because you don’t find something [on the internet], it doesn’t mean it’s not there,” said absence management and employment law attorney Marti Cardi, vice president of Product Compliance for Matrix Absence Management.

For example, Cardi said, an obscure Texas law provides job-protected leave for volunteer ham radio operators called into service during an emergency.

Cardi said employers should task HR to investigate the laws in each state the company operates in, and to ensure that supervisors are educated about the existence of these laws.

“If a supervisor is told by one of his or her employees, ‘Sorry I’m not coming in today … I’ve been called to volunteer firefighter duty for the [nearby region] fire,’” she said, you want to be sure that the supervisor knows not to take action against the employee, and to contact HR for guidance.

“Training supervisors to be aware of this kind of absence is really important.”

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An employer that does terminate a protected volunteer for responding to an emergency may be ordered to pay back wages and reinstate the employee. In some cases, the employee may also be able to sue for wrongful termination.

And of course, “you don’t want to be the company in the headlines that is getting sued because you fired the volunteer firefighter,” she added.

If an employer bars a volunteer from responding, the worst-case scenario may be a third-party claim. Failure to comply with the law could give rise to a claim along the lines of “‘If you had complied with your statutory obligation to give Jane Doe time to respond, my loved one would not have died,’” explained Philadelphia-based Jonathan Segal, partner at law firm Duane Morris and managing principal of the Duane Morris Institute.

“That’s the claim I think is the largest in terms of legal risk.”

Even if no one dies or is seriously injured, he added, “there could still be significant reputational risk if an individual were to go to the media and say, ‘Look, I got called by the fire department and I wasn’t allowed to go.’”

The Right Thing to Do

What employers should be thinking about, Segal said, is that whether or not you have a legal obligation to provide job-protected leave for volunteer responders, “there’s still the question of what are the consequences if you don’t?”

Employee morale should be factored in, he said. The last thing any company wants is for employees to perceive it as insensitive to their interests or the interests of the community at large.

“Sometimes employers need to go beyond the law, and this is one of those times,” — Jonathan Segal, partner, Duane Morris; managing principal, Duane Morris Institute

“How is this going to resonate with my employees, with my workforce, how are people going to see this? These are all relevant factors to consider,” he said.

There’s an argument to be made for employers to look at the bigger picture when it comes to any volunteer responders on their payroll, said Segal.

“Sometimes employers need to go beyond the law, and this is one of those times,” he said. “Think about the case where’s there’s not a specific state law [for emergency responders] and you say to a volunteer, ‘No, you can’t leave to deal with this fire’ and then people die. You as an employer have potentially played a role, indirectly, because you didn’t allow the first responder or responders to go,” he said.

The bottom line is that “it’s the right thing to do, even if it’s not required by law,” agreed Cardi.

“I feel that companies should have a policy that they’re not going to discipline or discharge someone for absences due to this kind of civic service, subject to verification of course.”

Clear Policy

While most employers do strive to be good corporate citizens, it goes without question that employers need to guard their own interests. It’s not especially likely that volunteer responders will try to take advantage of the unpaid leave allowed them, but of course, it could happen.

That’s why it’s important to have policies that are aligned with state laws. Those policies could include:

  • Notifying the company of any volunteer affiliations either upon hire or as soon they are activated as volunteers.
  • Requiring that employees notify a supervisor as soon as possible if called to an emergency (state requirements vary).
  • Requiring documentation after the event from the head of the entity supervising the volunteer’s activities.

If at some point it becomes excessive – someone has responded to emergencies five times in nine weeks, then it’s time to examine the specifics of the law and have a discussion with the employee about what’s reasonable, said Segal. It may also be time to ask specifics about whether the person is volunteering each time, or are they being called.

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In some cases, the discussion may need to be about finding a middle ground, especially if an employee has taken on an excessively demanding volunteer role.

“We encourage volunteers to pick the style that best fits their schedule,” said Greta Gustafson, a representative of the American Red Cross. “Disaster volunteers can elect to respond to disasters locally, nationally, or even virtually, and each assignment varies in length — from responding overnight to a home fire in your community to deploying across the country for several weeks following a hurricane.

“The Red Cross encourages all volunteers to talk with their employers to determine their availability and to communicate this with their local Red Cross chapter.”

Segal suggests approaching it as an interactive dialogue — borrowing from the ADA. “Employers may need to open a discussion along the lines of ‘I need you here this week because this week we have a deliverable on Friday and you’re critical to that client deliverable,’” he said, but also identify when the employee’s absence would be less critical.

No doubt there will be tough calls. An employer may have its hands full just trying to meet basic customer needs and need all hands on deck.

“That may be a situation where you say, ‘First let me check the law,’” said Segal. If there’s a leave law that applies, “then I’m going to need to comply with it. If there’s not, then you may need to balance competing interests and say, ‘We need you here.’” &

Michelle Kerr is associate editor of Risk & Insurance. She can be reached at [email protected]