They needn’t have worried though because in the United States Flood Risk is considered fundamental and cannot be covevered under a normal home insurance policy as such…as yet!

In fact all home insurance flood risks are the responsibility of each State to provide under a national scheme. In the United States, uniquely in the developed world, insuring houses against flood damage is the sole province of the federal government.

The National Flood Insurance Program (NFIP), was created in 1968 by Congress and is administered by the Federal Emergency Management Agency, is virtually the only place to get protection against the ever increasing disasters of flood and storm surge.

From an insurance point of view the program is the same as any other private-sector insurance program.

You pay the government a certain amount and when a flood happens, receive coverage for repairs and losses.

As of June 30, the program had nearly 5.6 million policies in force with a total insured value of $1.246 trillion. But from a fiscal standpoint FEMA does not manage the NFIP like a traditional insurer.

Most insurers use a measure of solvency that looks at their capital and reserves and their ability to pay claims. In particular, regulators require insurance companies to keep a statutory reserve of liquid assets to cover potential future losses. FEMA, on the other hand, has said it manages the NFIP to generate enough premiums to cover expenses and losses for an average loss year, rather than keeping capital for the long term.

In other words it does not keep enough reserves! And guess what? It’s run out of money!

Apparantely former agency officials admit it charges rates that dramatically underprice the risks faced. That is all well and good in a normal year and when business is good, but when a worse-than-average loss year happens, the consequences are disastrous.

Folowing the disatrous hurricanes Katrina and Rita in 2005, the NFIP was more or less insolvent, without the capacity to pay the huge volume of claims those hurricanes created. Congress reacted by increasing the NFIP’s borrowing ability from the U.S. Treasury more than 13-fold, to a level of nearly $21 billion. That debt burden is, by all accounts, unsustainable.

While Irene was no Katrina, it comes on top of serious Midwestern flooding that the program has already had to deal with this year. Some people believe NFIP will stretch its debt boundaries and may well end up needing more assistance. “It may be a little bit too soon to tell but it’s certainly not going to be a very good year for the NFIP and we’ve not finished the year yet,” said Robert Hartwig, an economist and the president of the Insurance Information Institute (III).

Hartwig said a private insurance market for flood coverage is absolutely possible, with plenty of insurers and reinsurers willing to get into the business – but only if the NFIP raises its rates and if insurers get assurances from state regulators that they will be able to do the same.

Insurance Blog wonders if given all the recent flood claims in the UK due to climate change and the pressure to build houses on floodplains, whether Flood Insurance will at some point become a fundamental risk in the UK for some homes?

The UK Government would be well advised to consult with construction companies, environmental scientists, climatologists, pressure groups and Insurance companies before we reach the crisis about to hit the US Treasury.

The solution is simple – do not solve the UK housing problem by building on floodplains or areas of geographical risk.

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“Check your policy wording and put your spacesuit on!”

Insurance Business have finally moved into the 21st Century with some truly space age of aquarius exposures to risk to deal with over the next year, according to a new report from Lloyds of London.

These new age risks include Space weather, cyber risk and critical infrastructure attacks that are predicted to cause big problems for consumers, businesses and their insurance companies in 2011.

The Lloyd’s 360 Risk Insight report states that ‘The phenomenon of space weather is one of the most difficult to quantify and yet potentially serious sources of loss and disruption for business.’

“Space weather and its impact on Earth: Implications for business”, says that businesses should be looking at ways to assess and mitigate space weather risks this year because the 11-year solar cycle is expected to peak in 2012/13.”

Turbulent space weather created by solar phenomena such as coronal mass ejections, solar flares, solar wind, solar radiation and magnetic storms could have wide ranging impacts around the globe in climatic responses, many scientists believe.

These phenomena are also predicted to affect aircraft communications, air traffic control and navigational systems which could malfunction or might stop working, satellite and GPS systems could also malfunction, and surprisingly. power grids could collapse.

Scientists know a lot about the possible causes and effects of solar weather from previous cycles. Established infrastructure that we take for granted, such as rail networks, telephone systems, pipelines and electric power grids have all been seriously disrupted by space weather in the past.

But the economic fall-out that could result from the increasingly active solar season is far less certain. That’s because our dependency on wi-fi and internet technology is so much greater than before.

“There is growing concern that the coming solar maximum will expose problems in the many wireless systems that have grown in popularity during the quiet solar conditions that have prevailed over recent years,” the Lloyd’s report warns.

Insurance Blog should have a lot to write about then over the coming year if these concerns are realised.

And then it’s 2012!

Don’t worry about the risks to the Olympic games! The Mayan Calendar stops here……….

And the earth is positioned in alignment with the centre of of the Universe!

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however , a report released this week from Aon Benfield’s Impact forecasting team has predicted that the cost of recent natural disasters is likely to cost both the reinsurance and insurance sector billions.

The capital advisory unit provided the damning verdict in the latest edition of its Monthly Cat Recap report its regular analysis of worldwide catastrophic events. A combination of the Chilean earthquake, Windstorm Xynthia and savage winter conditions across the US and Europe in February has left many in the industry feeling the financial impact.

The magnitude 8.8 earthquake in Chile, the seventh strongest earthquake ever record, has devastated the South American country and has taken the life of at least 795 people. The tragic disaster follows only weeks on from the horrific Haiti earthquake disaster which has sadly now claimed over 200,000 lives.

However, it is the impact of the Chilean earthquake which may effect the tentative recovery of the global economy as the country has far more exposure to risk than the poverty stricken Caribbean island. With more than 1.5 million homes, buildings and other structures affected insured losses alone are set to be in single figure billions of dollars whilst the economic losses are expected to reach tens of billions of dollars. (USD)

There was further suffering in South America with flooding across four regions of Bolivia killing 15 people and more than 100,000 people having to abandon their homes. It is believed that well over than 35,000 homes have been damaged. Also in the continent 20,000 homes have been damaged or destroyed in Peru due severe flooding which also affected Uruguay and Argentina.

In Europe Windstorm Xynthia ravaged Spain, Portugal, France, Belgium and Germany causing damage right across western Europe and leaving close to two million homes without electricity. The report predicts that the insured losses resulting from the storm are expected to be in excess of 1.8 billion dollars (USD)

Meanwhile the heavy rains that soaked the continent were responsible for extensive flood damage in Bulgaria, Turkey and Italy. Greece’s current troubles were also deepened with 20,000 hectares of land flooded and damage to homes and infrastructure likely to cost approximately 10 million dollars (USD). Other areas hit by torrential rain and flooding were Madeira and Spain with reports of further lives being lost in Madeira and extensive property infrastructure damage resulting in reconstruction costs which are likely to approach 1.35 billion dollars.

The US too has also suffered severe winter storms as commentators suggest that the effects of climate change are beginning to take hold. Several key regions including Washington, New Jersey, Baltimore and Philadelphia which resulted in widespread blackouts and disruption to schools, airports, roads and railways. Over 35,000 claims have been filed in the US across February totalling 125 million dollars (USD)

With plenty of insurers posting strong financial profits after the benign hurricane season last year it seems Mother Nature is intent and making herself felt once again – or are we feeling as some would have us believe the first real effects of the climate change?

Either way February 2010 will be a month that will marked in history as a tumultuous and tragic year which has resulted in heavy costs both financial term and also tragically the loss of innocent life.

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The wave of hurricanes that has devasted many parts of the Caribbean and the Gulf Coast of America has hit Yacht Insurance companies hard. Many billions of pounds and dollars are invested in vessels large and small in this part of the world and the London Insurance market caters for the large part of coverage and underwrites most of the risks.

Yacht Insurance has been suffering over the past few months due to the credit crunch with small boat insurers reporting a steady drop in business compared to this time last year. Despite Britains yachting and boating success at The Olympics, the boat is often the first thing to go when people start making cutbacks. Similarly orders for new sailing vessels are down.

With the damage costs of the wave of hurricanes mounting daily – Early reports suggest that Hurricane Katrina alone could cost more than £100m, according to the latest estimates from American risk assessors, however this could easily mount rapidly over the next few weeks as claims assessors have yet to asses the damage in the more remote areas. A re-insurance expert has said that reserves of $18 billion are being bandied around. Senior UK industry risks managers are also suggesting the total loss from the storms could be in excess of £10 billion when the winds finally settle.

A spokesperson for Yachtline – one of the UK’s largest online yacht insurers – and specialist caribbean yacht and mega yacht underwriter, refused to comment on the amount of claims received but did say that the number of claims was up four times on this time last year.

It looks like it may be stormy waters ahead for Yacht Insurance this year!

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