Superstorm Sandy What Risk Managers and Underwriters Learned Gary Ladman Vice President, Property Underwriting AEGIS Insurance Services, Inc. Superstorm Sandy Change in the Weather Recent years appears to indicate increase in frequency and severity of weather events Sandy, Irene, tornadoes in Midwest Predictions that this trend will continue to escalate Temperatures have risen 1.5 F in past century Sea levels have risen How does this impact the utility industry? How will this impact property insurance for utilities? 1
Hurricanes in the US 16 14 12 10 8 6 4 2 0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Total Hurricanes Made landfall as hurricane Largest Population Change In Coastal Counties (1960 2008) 12,907,103 10,035,878 3,566,531 2,465,351 1,725,133 1,623,672 1,189,466 885,309 817,703 California Florida Texas Washington Virginia New York New Jersey Maryland Massachusetts 2
Superstorm Sandy and Tornadoes Named windstorms (NWS) occur June through October No NWS ever made landfall before June or after November September is most common month for hurricanes making landfall in the US Tornadoes occur year round April through June are the most common months Often are part of a major NWS event Most Costly US Catastrophes Involving Windstorms $41,000.00 Hurricane Katrina $18,750.00 Superstorm Sandy $15,500.00 Hurricane Andrew $12,500.00 Hurricane Ike August 25-30, 2005 October 28-31, 2012 August 24-26, 1992 September 12-14, 2008 3
Most Costly US Catastrophes Involving Tornadoes ($ Millions when Occurred) $7,300 $6,900 $3,205 $2,700 $2,500 $2,500 $2,200 $2,000 $1,850 April 22-28, 2011 May 20-27, 2011 May 2-11, 2003 October 4-6, 2010 March 2-3, 2012 April 28-29, 2012 April 6-12, 2001 May 12-16, 2010 April 13-15, 2006 Top Ten States, by number of Tornadoes (2012) 145 114 87 75 65 53 48 41 40 39 Kansas Texas Alabama Mississippi Kentucky Louisiana Nebraska Oklahoma Florida Illinois 4
What Underwriters Learned CAT modeling tools not reliable for flood and storm surge Underwriters need much more information to underwrite flood exposures Insured provide detailed information Loss control to determine flood zones and secondary modifiers Locations and values actually exposed What Underwriters Learned Underwriters need to remain diligent in evaluating information and addressing exposures 5
FirstEnergy: Superstorm Sandy Thomas McDonnell Manager, Insurance & Operational Risk FirstEnergy Corp. Pre Storm Preparation Proactive Preparation is Vital to Restoration FirstEnergy meteorologists monitor and forecast storms and areas of impact Local and Mutual Assistance crews are strategically positioned to respond Communications are established with responders, state officials, and media Staging areas and command centers are established to coordinate the response Crews inspect at risk locations and take preventative measures More than 8,000 workers were staged in 14 areas helping to restore service to 90% of affected customers within 7 days 6
Casino Pier Seaside Heights, NJ Funtown Pier Seaside Heights, NJ 7
Casino & Funtown Piers Seaside Heights, NJ Superstorm Sandy 8
Hurricane Sandy By the Numbers 2.47 million: FirstEnergy customers who lost power in New Jersey, Pennsylvania, Ohio, West Virginia and Maryland 1.5 million: customer outage calls received at our three contact centers 20,000: line workers, hazard responders, forestry workers, contact center representatives, management and support personnel involved in storm response 30,000: cross arms damaged by storm 10,000: utility poles replaced 6,400: transformers replaced 930: miles of wire replaced $850 million: total cost of the storm Storm Preparation Going Forward Always Room to Improve Strengthening of infrastructure Over $500 million in system reliability improvement projects Enhanced communications Advanced outage management system more accurately and quickly pinpoints outages Improved online customer outage maps provide more accurate updates and restoration estimates Text messages, phone apps, and social media accelerate the communication process and provide localized info Vegetation management Over 3,500 circuit miles will be trimmed in JCP&L alone by the end of 2013 Crew mobilization Enhanced outage management systems allow for better prioritization and more rapid and accurate crew deployment 9
Superstorm Sandy What Risk Managers and Underwriters Learned David Layne Senior Treasury and Risk Manager The Empire District Joplin Tornado May 22, 2011 EF-5 Tornado Strikes Joplin on Sunday Evening at 5:41 pm Storm path is 13 miles long and more than ¾ mile wide Wind speeds in excess of 200 mph 20,000 customers without power St. Johns Hospital destroyed 6 of 17 Joplin schools damaged / destroyed 7,500 homes damaged / destroyed 557 businesses damaged / destroyed 162 lives lost and more than1,500 injured 10
Path East to West St. Johns Hospital Joplin High School 11
Residential Structures Business Structures 12
EDE Facility Damage Transmission Ten transmission lines out of service 135 structures affected Substations Six initially impacted Sub 59 destroyed 422 and 430 damaged EDE Facility Damage Distribution 100 miles of line down Approx. 3,900 poles damaged 31 of 60 circuits off 1,450 transformers recovered Fiber 30 cuts repaired / replaced $30 million total cost of storm 13
Immediate Response Immediate mobilization Communication issues Employees responded, even those personally affected Assess damage De-energize lines Make safe for public, emergency and Empire personnel Make safe for roads to be cleared Debris removal Critical Infrastructure Assessment and Restoration Freeman Hospital Primary substation de-energized but minimal damage Transmission down over a half mile in both directions Primary circuit Distribution down from substation to hospital Alternate substation destroyed Alternate circuit damaged and no connection to energized substation Engineered and constructed alternate circuit before sunrise Water & sewer services restored within 72 hours 14
Mutual Aid and Restoration Results 247 lineman from 6 companies 144 tree trimmers and debris removal personnel from 4 companies Established 12 pole and material yards throughout town Poles dropped, materials filled and kitted overnight Within 1 week St. John s temporary hospital Within 10 days service restored to all who could receive service Within 1 month 600 FEMA units, 5 new subdivision extensions, temporary school sites Worked hand in hand with City, State, FEMA and USACE Lessons Learned Improve system reliability increase sectionalization to reduce customers affected during outages Mobilize storeroom operations around the clock Book hotel rooms, provide box lunches and laundry services for crews Communication difficulties overcome Underground not necessarily better OMS ineffective due to damage; relied solely on field verification Storm material kitting plan revision Retrain construction designers to assess damage and write jobs 15