The Great New England Hurricane of 1938

Transcription

1 K A R E N C L A R K & C O M P A N Y The Great New England Hurricane of 1938 What a 100 Year Northeast Hurricane Will Do Today September 16, COPLEY PL AC E B OSTO N, M A T: F:

2 The Great New England Hurricane of 1938 and What a 100 Year Northeast Hurricane Will Do Today Seventy-five years ago, on September 21, 1938 a deadly and devastating hurricane came ashore near Bellport, Long Island. Believed to be a Category 3 hurricane at landfall with sustained winds of 120 mph, the storm caused unprecedented destruction and casualties for the Northeastern US. Significant wind damages were experienced throughout the region, and many coastal towns were completely wiped out by storm surge heights exceeding 10 feet. Because there was no advance warning, nearly 700 people died in this hurricane with an equal number injured. Thousands of homes and other buildings were destroyed, and over 3,000 ships were sunk or wrecked. The hurricane felled millions of trees throughout the region and destroyed entire forests. It downed power lines and caused outages over most of New England. When this type of storm occurs again, the insured damages and economic losses could be larger than any storm seen to date because of the enormous concentrations of property values along the coasts of New York, Connecticut, Rhode Island, and Massachusetts. KCC estimates that over $15 trillion of property value would be in the storm s footprint today. While better forecasting systems will likely prevent the large loss of life, the right track could result in insured losses exceeding $100 billion and economic losses more than double that number. As we approach the seventy-fifth anniversary of the Great New England Hurricane of 1938 this report examines what this storm would do today and more importantly, what a 100 year Characteristic Event (CE) looks like for the Northeast region. What type of event should insurers be prepared for and what could be worse than the 1938 storm? This report shows the primary determinant of likely losses in the Northeast is the storm track, and insurers should not be lulled into a false sense of security by looking only at what s happened in the historical record. Copyright 2013 Karen Clark & Company, Inc. The Great New England Hurricane of

3 A Historical Perspective The Storm in 1938 The Great New England Hurricane of 1938 started out as a typical Cape Verde hurricane with a westnorthwesterly track that seemed destined for a Florida landfall. On September 19 th the Jacksonville office of the US Weather Bureau issued a warning that the storm might impact the state. But a deep trough over the Appalachian region caused the hurricane to turn northward on September 20 th and to pick up speed on a more northerly track. After the track change, the responsibility for the forecast shifted to the weather bureau s headquarters in Washington DC. Senior meteorologists in that office did not believe the storm would make landfall in the Northeast but rather predicted it would veer out to sea as was typical for hurricanes. They also forecast a weaker storm due to the colder ocean waters north of Cape Hatteras. Only one young meteorologist named Charles Pierce was concerned about the track of the hurricane. Observing the high pressure system over the continental US and a Bermuda High further north than usual, Pierce predicted the storm would remain sandwiched between these two systems and take a path due north into New England rather than turning to the northeast and out to sea. Unfortunately, Pierce was overruled by the senior staff who had never seen a hurricane make landfall in the Northeast. Consequently, no hurricane warnings were issued for New England, and the storm was downgraded to a tropical storm. Only gale force warnings were issued for the region. The great storm continued on its northerly track, picking up speed and intensity. When it made landfall across central Long Island on the afternoon of the 21 st, it was traveling at over 50 mph with a defined eye of over 40 miles. Maximum winds at landfall were an estimated 120 mph. The hurricane sped through the region moving due north until turning to the northwest and tracking into Canada. Track of Great New England Hurricane September 21, 1938 Weather Map Source: Track Data from Reanalysis of Ten U.S. Landfalling Hurricanes Source: intellicast.com Copyright 2013 Karen Clark & Company, Inc. The Great New England Hurricane of

4 With no warning of the imminent danger, coastal residents along the Long Island, Connecticut and Rhode Island shores were taken by surprise when the skies darkened, the winds picked up, and the rising waters started flooding their homes. Before they could even imagine what was happening, waves and walls of water over 10 feet high came crashing across the shore destroying homes and well built structures as if they were matchsticks. Personal accounts of survivors can only hint at the horror of that afternoon. The images below reveal the extent of the destruction. Location: Williston Park, Long Island Source: New York Daily News Location: Westhampton Beach, NY Source: Time Location: Island Park, RI Source: NOAA Photo Library Location: Cranston, RI Source: Rhode Island Historical Society Location: Providence, RI Source: Boston Globe Location: New London, CT Source: Rhode Island Historical Society Location: Amherst, MA Source: Library of Congress Collections Location: Worcester, MA Source: NOAA Photo Library Location: Canton, MA Source: Canton Historical Society Copyright 2013 Karen Clark & Company, Inc. The Great New England Hurricane of

5 The damage toll was extensive: Over one third of New England s forests affected with over two billion board feet of trees felled by the storm Significant structural wind damage experienced as far inland as Worcester, MA 700 fatalities; 63,000 homeless Tens of thousands of buildings destroyed What a Similar Hurricane Would Do Today Source: RiskInsight 1938 Track and Wind Footprint While there are few reliable wind speed measurements for the Great New England Hurricane of 1938, the wind footprint can be reconstructed using the meteorological data and analyses conducted by various research organizations, including the National Hurricane Center (NHC) and the Risk Prediction Initiative (RPI). Using this information, KCC experts reconstructed the wind footprint. KCC estimates this storm would cause insured losses in excess of $35 billion today and economic losses of more than twice that amount. While there is less actual data, historical records indicate several major hurricanes impacted the Northeast region before Dr. Nicolas Coch from Queens College on Long Island has found evidence of notable events in 1635, 1821 and His work is supported by the scientific papers of Donnelly and Boose referenced at the end of this paper. Copyright 2013 Karen Clark & Company, Inc. The Great New England Hurricane of

6 Given the historical record, it s reasonable to assume the Great New England Hurricane of 1938 is a 100 year type event for the Northeast. While a storm of this intensity, i.e. maximum sustained winds of 120 mph, has an estimated one percent probability of occurring, it could make landfall anywhere along the Long Island, Rhode Island, or Massachusetts coastline. The various landfall points will result in dramatically different industry losses and damages because hurricanes are right handed in the northern hemisphere, with the strongest winds occurring from a few miles to 50 miles to the right of the storm center. In the Northeast, hurricanes tend to be large with an eye radius in excess of 20 miles. Hurricanes that make landfall further to the west will cause more damage in the Northeast because more of the right side of the storm will be over highly populated areas. To account for the risk along the entire coast, KCC has developed the Characteristic Event (CE) methodology of floating the 100 year CE and estimating the resulting losses. There are 22 landfall points spaced at 10-mile increments in the Northeast region. The CEs have the return period wind speeds and other characteristics, such as track, forward speed, and filling rate that are typical for the region and selected return period. The figures below show the wind footprints for three of the 100 year CEs. Landfall: Queens, NY Landfall: Hampton Bays, NY Landfall: Westport, MA Industry Loss Distribution of Loss NY CT RI MA NH ME Other Distribution of Loss NY CT RI MA NH ME Other Distribution of Loss NY CT RI MA NH ME Other Copyright 2013 Karen Clark & Company, Inc. The Great New England Hurricane of

7 Estimated Loss ($ Billions) To estimate the industry losses for the floated CEs, KCC utilized a detailed proprietary database of property values (KPD). The KPD includes estimates of building, contents, and time element values by occupancy class and five-digit ZIP code. The chart below shows the industry losses from the 100 year CE making landfall from western Long Island to Cape Cod Year CE Losses for the Industry by Landfall Point With respect to the losses, the worst tracks are those in which the hurricane makes landfall across western Long Island. The westernmost landfall points result in insured losses exceeding $100 billion. Historically, no major hurricane has taken this track, but given the length of the historical record this doesn t mean it s not possible or probable. Tools that rely on the historical record alone can significantly underestimate the chances of this type of an event and potential Northeast hurricane losses. Insurers should not make the same mistake as the senior forecasters who did not believe the 1938 storm was going to make landfall on Long Island because they hadn t seen it happen before. Two recent tropical cyclones, Irene (2011) and Floyd (1999), made landfall close to New York City and had they been major hurricanes would have caused losses much greater than any historical Northeast event. Irene s track in particular would have caused insured losses in excess of $100 billion had it been the intensity of the 1938 event. Copyright 2013 Karen Clark & Company, Inc. The Great New England Hurricane of

8 Managing Hurricane Risk Using the CE Methodology For the past 20 years, insurance companies have been using exceedence of loss probabilities, such as one percent and 0.4 percent, to quantify and manage hurricane risk. One in 100 and one in 250 year probable maximum losses (PMLs) are currently used by rating agencies and regulatory bodies. While these numbers are interesting mathematically and are readily derived from the catastrophe modelgenerated exceedence probability (EP) curves, they do not provide intuitive or robust risk metrics for managing hurricane risk. The PML approach can give a false sense of security by masking exposure concentrations that could lead to solvency-impairing events. Because the model-generated EP curves are developed through simulations of random tracks and other hurricane characteristics, exposure concentrations can be missed entirely that is, there may be no or insufficient events in geographical areas where a company has significant exposure concentrations. (Alternatively, other areas can be over sampled.) That is one reason why there have been so many surprise events and black swans over the past several years. In recognition of the fact that PMLs don t provide answers or complete information, companies can be tempted to go back to the more straightforward approach of simply adding up limits to monitor accumulations. While providing important information, this can lead to overly conservative strategies and is not totally satisfying because a billion dollars of limit is a lot different in Florida versus the Northeast, for example. Likewise, simple scenario-based approaches, such as Lloyd s Realistic Disaster Scenarios (RDS), do not capture exposure concentrations or probabilities effectively. In light of these problems and risk management challenges, KCC introduced the Characteristic Event (CE) loss estimation methodology. In the CE approach, the hazard probabilities are quantified and then the losses are calculated for different return period events by landfall point. It s the flip side of the EP curve approach. The probabilities are based on the hazard versus the loss. There are several advantages of the CE approach. While providing probability information, it also clearly identifies exposure concentrations and hot spots and provides transparent and intuitive information for decision makers, including boards and CEOs. The CEs stay the same from year to year, providing consistent metrics for measuring and monitoring risk over time. CEs are operational risk metrics that can be drilled down to individual policies for marginal impact analyses, pricing, and portfolio management. The 100 year CE loss chart is shown below for a hypothetical company. The landfall points are shown along the x-axis, and the red bars show the losses from the 100 year events at each point. The black horizontal line shows the company s model-generated PML in a position that s typical for most insurers. The CE chart illustrates much richer and more complete information than the simplistic PML number. It shows clearly where the company could have a loss well above the 100 year PML from the 100 year CE. Copyright 2013 Karen Clark & Company, Inc. The Great New England Hurricane of

9 Estimated Loss ($ Millions) Because the CEs are stable from year to year, companies can use them to measure and monitor loss potential over time and to develop more optimal portfolios of business while reducing the spikes Year CE Losses by Landfall Point for Hypothetical Company Model-generated PML Model-generated PMLs provide valuable information on potential losses, but they are less effective in helping companies understand and manage the risk. Companies want more consistent risk metrics, full transparency on the loss calculations and key drivers, and flexibility to customize assumptions to better reflect their specific books of business. The CE approach delivers the solution to these risk management challenges. The CE approach is not limited to hurricanes, but can be applied to any peril in any region of the world. KCC is collaborating with several scientific organizations to create CEs for European windstorms, earthquakes, floods, and other hazards. Copyright 2013 Karen Clark & Company, Inc. The Great New England Hurricane of

10 Validating the Wind Footprint for the 1938 Hurricane The wind footprints shown in this document were developed using RiskInsight, the advanced open platform for catastrophe risk management. KCC experts devote considerable resources to developing and validating the components of RiskInsight. Because there were very few recordings of the wind speeds for the 1938 Great New England Hurricane, scientists have studied this storm and inferred the likely wind speeds from other data, including the damage. Dr. Emory Boose extensively studied the tree damage for the 1938 event and converted his findings to the Fujita scale used for tornados. There is high correlation between the observed damage pattern and the RiskInsight footprint Wind Footprint from RiskInsight 1938 Wind Footprint from Dr. Boose Source: RiskInsight Source: Boose, E.R. Fully transparent and highly credible wind footprints for all significant US hurricanes since 1900 are available in RiskInsight. Over 2,000 CE footprints are also available for all major return periods and coastal regions. These footprints can be used to estimate losses for individual policies, portfolios of policies, and the industry as a whole. For more information contact: info9410@kcc.us.com RiskInsight is a registered trademark of Karen Clark & Company Copyright 2013 Karen Clark & Company, Inc. The Great New England Hurricane of

11 References Boose, Emery R. et al., Landscape and Regional Impacts of Hurricanes in New England. Ecological Monographs 71: Coch, Nicholas. The Unique Vulnerability of the Northeast U.S. to Hurricane Damage. Geological Society of America. Abstract. National G.S.A. Philadelphia, 2006 Coch, N. K., 1994, Hurricane hazards in the Northeast U.S. Journal of Coastal Research. Spec Issue No Coastal Hazards, Chapter 9 (pp ). D Aleo, Joe (2008). The September Surprise The Great New England Hurricane of 38. Retrieved from Donnelly, Jeffrey et al, 700 Year Sedimentary Record of Intense Hurricane Landfalls in Southern New England Geological Society of America. June Goudsouzian, Aram. The Hurricane of 1938.Commonwealth Editions, Landsea, C., M. Dickinson, and D. Strahan, 2008: Reanalysis of Ten U.S. Landfalling Hurricanes. Final report submitted to the Risk Prediction Initiative, 120pp. Monthly Weather Review - September National Hurricane Center. Volume 66 Issue 9. NOAA Hurricane Research Division of AOML (HURDAT). Retrieved from Copyright 2013 Karen Clark & Company, Inc. The Great New England Hurricane of