Katrina and other storms such as Sandy have helped to greatly improve catastrophe risk research and modeling. Katrina showed the impact of storm surge can often be more damaging than high wind speeds and that the physical size of the hurricane can affect the surge itself. Storm surge has been a contributing factor in half of the top 10 costliest storm losses in US history, with these five storms having collectively caused almost $125bn in insured losses.
The flooding caused by Katrina also showed the state of the levee systems in the US to be substandard and in need of repairs estimated to be $100bn, according to the National Committee on Levee Safety. There are many levee systems throughout the US that would reveal similar deficiencies if subjected to the same level of scrutiny as those in New Orleans.
Katrina also outlined the need for better wind damage protection. Most of the wind damage caused by Katrina occurred to the building envelope, comprising roof covering, walls and windows. “If the building codes had been strictly followed, wind damage would have been greatly reduced,” says Andrew Higgins, Technical Manager, Americas, Allianz Risk Consulting. “Poor workmanship and a lack of knowledge were the primary culprits.” After Katrina, Allianz developed enhanced roof surveys, placing greater scrutiny on condition and age of roofs.
Importance of business continuity in the aftermath of a catastrophe, knowing exactly what is covered by the insurance policy ahead of a windstorm event and the unexpected impact of demand surge are the other key lessons learned. Katrina showed demand surge for materials in order to rebuild after a catastrophe not only leads to rising prices and supply shortages but can also have peripheral loss consequences, such as were seen post-Katrina with the use of sub-standard batches of Chinese drywall.
“Today, the Gulf Coast is better prepared to withstand the effects of a hurricane due to better education, improved construction guidelines and increased third party inspection,” says Higgins.