2020 – The Year of Natural Hazards

Irvine, California company CoreLogic^®, a leading global property information, analytics and data-enabled solutions provider, released at the end of January its annual Catastrophe Report highlighting the value of modern insurance and mortgage solutions in addressing the increase in climate change-induced hazard events and impact on the real estate economy.

Figure 1. Redefining Risk: CoreLogic Combined Peril Score (Graphic: Business Wire)

“CoreLogic data shows that nearly every property in the U.S. has exposure to peril risk. The unexpected nature of these occurrences should encourage businesses to better prepare for potential risks,” said Frank Nothaft, chief economist at CoreLogic. “The trickle-down effect of a catastrophic event, as seen most recently by the pandemic, can result in a shaky economy with high levels of unemployment and mortgage delinquency.” CoreLogic provides a report analyzing how industries can leverage new technologies to increase efficiency, reduce risk and ensure protection of American home ownership and commercial assets.

Redefining Risk: CoreLogic Combined Peril Risk Scores Show Most U.S. Properties Have Risk

Advanced risk modeling technology is the method by which CoreLogic combined the severity and frequency of damage caused by natural perils into a single composite risk score that represents the sum of the average annual loss for seven individual hazards (earthquake, wildfire, inland flood, severe convective storm, winter storm, hurricane and tropical storm coastal surge and wind) for approximately 105 million residential structures across the U.S.

As seen in Figure 1, a majority of properties in the U.S. are exposed to risk, however, not all geography is created equally. The highest risk homes are in California, Texas, Oklahoma, Kansas, Nebraska, along the Mississippi River, and large Gulf and Atlantic coastal stretches. The report outlines how this risk score can help various industries understand the relative risk for any structure across the U.S.

The recent freeze across Texas was evidence of this type of natural disaster for which the state was ill-prepared, and many homes suffered damange, and people perished.

“By leveraging granular data for the increasing frequency and severity of catastrophes, we are able to see that 35 million homes, which is almost a third of the U.S. housing stock, are exposed to high risk from natural hazards,” said Howard Botts, chief scientist at CoreLogic. “How insurers and lenders understand that risk through new technologies can allow them to better protect homeowners and lead to faster recovery times.”

2020 – The Year of Natural Hazards

2020 had over ten weather events surpassing $1 billion in economic losses mixed with consistent smaller events that contributed to loss.^.  Hurricanes, flooding, tornadoes and wildfires challenged front-line workers, critical infrastructure and first responders as the world struggled with a serious pandemic that forced them to stay home and shuttered many businesses. By leveraging the composite risk score and taking a look back at previous years’ events, insurers and lenders can better assess the risk of a location, anticipate severity and understand what happens post-event.

New Tools for Protecting Homeownership

Besides the pandemic, an increasingly volatile catastrophe risk environment is causing profit margins to shrink and prompting deep losses in areas where intense, large-spread catastrophes like wildfire, hurricanes and unemployment are concentrated. The computational power brought from cloud-computing has allowed probabilistic risk models to help insurers, mortgage and financial professionals to anticipate the severity of a potential disaster. Tech-savvy insurers and mortgage lenders are leveraging catastrophe risk science, weather verification tools and digital workflows to better understand peril risk and damages down to a parcel level. This allows them to create new homeowner products and services that better protect and secure their customers’ homes and strengthen the financial security of their businesses, according to CoreLogic company materials.

Major players in the property ecosystem need to lean harder on technology and risk science to ensure their customers and businesses are protected when the next disaster inevitably strikes again. With access to catastrophe modeling and property data, insurance businesses have an important opportunity to change the way they protect homeownership and property, offering new insurance options and transformational experiences that better suit today’s reality of risk and policyholder expectations.

The CoreLogic 2020 Catastrophe Report is now live, which analyzes the natural catastrophes of 2020 through the lens of climate change, the pandemic, and the overall threat to American homeownership. From the report:

Key Findings: 

• CoreLogic’s combined peril risk scores show that 35 million homes, which is almost a third of the U.S. housing stock, are exposed to high risk from natural hazards.
  • The highest risk homes are in California, Texas, Oklahoma, Kansas, Nebraska, along the Mississippi River, and large Gulf and Atlantic coastal stretches.
• We can no longer ignore the impact of climate change on the housing economy. CoreLogic is urging the insurance and mortgage industries to leverage new technologies to increase efficiency, reduce risk and ensure protection of American homeownership and commercial assets.
  • By leveraging catastrophe risk science, weather verification tools and digital workflows, insurers and mortgage lenders can better understand peril risk and damages down to a parcel level.
• 2020 marks the 6th consecutive year with more than 10 weather events surpassing $1 billion in losses (NOAA).

With regard to the southern winter storm, early data showed 23 million U.S. housing units affected by the southern winter storm, which is more than 15% of the national housing stock. CoreLogic found that 10.3 million of those homes are in regions of severe risk, with extremely low temperatures well below design requirements.

Here’s what we know: 

• 10.3 Million housing units throughout Texas and Oklahoma are in regions of severe risk
  • This means these homes experienced temperatures well below home design guidelines, pre-disposing them to winter storm risk. Design guidelines include wall and ceiling insulation, window standards, and insulated piping.
• 5 Million more housing units are in regions of high risk
• 3.5 Million housing units are in regions of elevated risk

Not all of the homes in this group are expected to incur significant damages from the freeze. Reviews of claims data for the most common report of loss (burst pipes) produces an average insured loss of roughly $10,000 per home. However, only a small fraction of homes in these regions are expected to experience burst pipes.

What was most notable about this storm was that the areas impacted were unaccustomed to such cold weather, therefore homes were not originally designed with that type of insulation that you ordinarily see in homes built for colder climates. The unexpectedness of the cold temperatures is a wake-up call for citizens everywhere, whose expectations may rely on what has happened before, rather than what is possible in the world of natural hazards.

Tags: climate change, data, geospatial, GIS, health, hurricanes, imagery, Infrastructure, laser scanner, mobile mapping, navigation, real estate, reality modeling, remote sensing, satellite imagery

Categories: 3D Cities, analytics, CoreLogic, disaster relief, emergency response, field GIS, financial services, geomatics, geospatial, insurance, laser radar, lidar, mapping, mobile, public safety, remote sensing, resilient cities, space-based flight tracking, spatial data, storm surge, utilities, wildfire risk

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