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ICLR Canada: Taking Action in Canada to Reduce Mounting Hail Losses (AIR Toronto Conference - Oct 20, 2015
- 1. Taking action to reduce mounting hail losses Glenn McGillivray Managing Director Institute for Catastrophic Loss Reduction October 20, 2015
- 2. ICLR ■ Mission - reduce loss of life and property caused by severe weather and earthquakes ■ Created in 1997 by the insurance community to confront rising disaster losses ■ Multi-disciplinary research and education provides an essential foundation for ‘science to action’ ■ 30 scientists / 100+ students / 12+ universities / 350+ research papers / $50+ million in research ■ Western University affiliated
- 3. In the media
- 4. ICLR board ■ Kathy Bardswick (Chair) ◆ President & CEO, The Co-operators Group ■ Barbara Bellissimo ◆ Chief Agent & Senior Vice President, State Farm Canada ■ Charmaine Dean ◆ Dean of Science, Western University ■ Louis Gagnon ◆ President, Service & Distribution, Intact Insurance ■ Andrew N. Hrymak ◆ Dean, Professor, Chemical and Biochemical Engineering, Western University ■ Paul Kovacs ◆ Executive Director, Institute for Catastrophic Loss Reduction ■ Sharon Ludlow ◆ President, Aviva Insurance Company of Canada ■ Sean Murphy ◆ President, Lloyd’s Canada ■ Gene Paulson ◆ President & CEO, Peace Hills Insurance ■ Brian Timney ◆ Dean of Social Science, Western University ■ Jonathan Turner ◆ Chief Financial Officer, Swiss Re ■ Phillipp Wassenberg ◆ Munich Re Canada
- 5. How does hail form?
- 6. Hail activity in Canada ■ Hail can occur in all provinces - and has - though all of the largest storms to date have taken place in Alberta ■ May give a false sense of security that only Alberta is at risk ■ High number of hail days also in BC, and south/central Saskatchewan, and southern Manitoba and Ontario ■ Several years of fairly moderate hail losses (1980s-90s) ■ However losses have really ramped over the last few years
- 9. Top hailers in Canada ■ Calgary (1995) $74.7 million ■ Montreal (1986) $86.7 million ■ Calgary (1998) $95.6 million ■ Calgary (1996) $120.0 million ■ Quebec (2008) $137.2 million ■ Sask. (2008) $144.9 million ■ Calgary (1996) $167.7 million ■ Edmonton (2004) $198.5 million ■ Calgary (1991) $518.2 million ■ Alberta (2010) $569.6 million ■ Calgary (2012) 578.2 million ■ Airdrie (2014) $568.9 million
- 10. Hail activity in Canada
- 11. Top hailers in Canada Calgary, AB 2010
- 12. Top hailers in Canada Calgary, AB 2012
- 13. Top hailers in Canada Aidrie, AB 2014 $1.72 billion
- 14. Damage from hail ■ Smaller hail storms generally only affect vehicles ■ Larger storms affect homes and other structures as well ◆ Roofs ◆ Siding ◆ Windows ◆ Roof top plant (eg. HVAC etc) ■ Damage often only esthetic in nature ■ Not just the size of hailstones, but the intensity in which they fall
- 15. Damage from hail ■ Hailstones generally get destructive when they are about 1 inch or larger in size ■ Large hailstones have the capacity to cause extensive damage to industrial and commercial assets, public infrastructure, trees, vegetation, crops and lifestock, vehicles and homes ■ In a large hail storm claims frequency seems to be equal between auto and property (50/50) ■ Claims severity, however, tends to be about 50% higher for property
- 16. Damage to homes ■ Roofing ◆ Majority of homes in Canada have asphalt shingle roofs (>90%) ✦ Encouraging move to metal, ceramic or rubber will likely be met with failure ✦ Esthetic damage to metal and ceramic high ◆ Class 4 asphalt shingle roof recommended in high risk hail zones ✦ Can withstand 95% of hailstorms ◆ ASTM D 3464 rating (American Society for Testing and Materials) for shingles made in the US and imported into Canada ✦ A US rating only, not used for Canadian-made shingles
- 17. Damage to homes ■ For a joint US/Canadian standard, see UL 2218 Impact resistance for roofing systems ■ UL 2218 involves dropping steel ball bearings of varying sizes at height to replicate impact of hailstones ■ Class 4 indicates shingle still functional after double strike in same spot by 2 inch bearing ■ Additional cost of Class 4 shingle depends on area of roof etc., but $1,000 for average roof would be fairly accurate ◆ Could be less with insurers’ buying power
- 18. Damage to homes ■ Insurers advised to provide incentives for Class 4 asphalt shingle roofs ■ Should replace hail damaged roofs with Class 4 asphalt shingles ■ Building codes should require Class 4 in high-risk hail zones ■ DO NOT confuse shingle warranties with resiliency ◆ Warranties are just marketing devices, a longer warranty does not equate to strength or resilience
- 19. Damage to homes ■ Other damage ◆ In very large hailers, damage is not limited to roofs, but may include damage to siding, vents, fascia, soffits, downspouts, skylights and fenestration (i.e. windows and doors) ◆ A lot of research done on roofing, very little to these other areas ◆ Virtually no IR standards exist for siding, vents, fascia, downspouts and fenestration ◆ Miami-Date rated skylights, windows and doors are possibilities, but are rated for high winds and not hail ✦ May be difficult to get in Canada
- 20. Damage to homes ■ Cement board siding a good alternative to vinyl or aluminum siding ■ Advantage 1: No longer have to paint it every few years as it now comes in a range of colours ■ Advantage 2: High resistance to fire, including wildfire ■ Much work needs to be done to fill the gaps in research re: vents, fascia, soffits, doors, windows etc.
- 21. Damage to vehicles ■ In moderate hailstorms, damage often limited to glass ■ In larger hailstorms, damage to glass and body panels
- 22. Damage to vehicles ■ Simplest and most common form of mitigation is to keep cars under cover ■ Permanent cover ◆ Car ports ◆ Garages ■ Temporary cover ◆ Tents/fabric shade systems ■ Car blankets ◆ Impact tested? ◆ Rated? ◆ Opportunity!
- 23. Damage to vehicles ■ Insurance incentivization for owners of fleets and large inventories of cars ◆ New car lots ◆ Used car lots ◆ Rental fleets ◆ Companies with large service fleets ■ Common in such places as Texas ■ Easier than incentivizing individual vehicle owners
- 25. Closed claims study ■ IBHS study of May 24, 2011 hailstorm in Dallas-Fort Worth ■ Looked at 67,100 residential policies in 20 zip codes n DFW metroplex ◆ 6,697 had claims ◆ 6,490 of which were roofing-related (97%) ■ Metal and wood roofs had highest claim frequencies (ratio of claims to total policies) ■ Slate, wood and metal had highest average severities (ratio of damage to claims in a given category) ◆ However, small portion of the dataset compared to asphalt shingles
- 26. Closed claims study Roofing-related damages were the main loss driver for this event. Distribution of claim frequencies with respect to roof covering materials.
- 27. Closed claims study ■ Important to collect and analyze larger datasets of non-asphalt products with associated age data to further examine performance of these types of materials ■ Areas of highest hail damage did not necessarily align with radar-estimated areas of largest hail sizes ■ Could be due to differences in ages, materials, construction or sheltering of buildings ■ Broader future study needed into correlation between radar estimates of hail sizes with ground observations of actual damage
- 28. Closed claims study ■ Increasing focus on effects of aging on the durability and performance of materials ■ Older buildings have a higher claim frequency in a variety of natural disasters ■ Some of this may be due to improved building codes ■ In other cases, may be due to degradation of building materials and/or poor maintenance practices ■ Claim frequencies in this study tended to increase with the age of the home
- 29. Building codes protect homes Severe wind damage, Florida, dollars per square foot, 2004 - 2005
- 31. Closed claims study ■ Importance of the roof ◆ More research needed to understand differences between functional and cosmetic damage ◆ Does cosmetic damage lead to functional damage down the road? ◆ Need to find cost effective ways to repair asphalt shingle roofs with just cosmetic damage ■ Roofing materials ◆ Need larger datasets of damage to non-asphalt roofing products with associated age data ■ Damage locations vs. hail size estimates ◆ Need to study a future event to conduct a broader study of the correlation of radar estimates of hail sizes with ground observations to help enhance the development of radar detection algorithms
- 32. Closed claims study IBHS Claims Analysis Study May 24, 2011 Hailstorms in Dallas-Fort Worth http://bit.ly/1LksucR
- 33. Watching for fraud ■ Fraud can be evident with any catastrophe claim, but particularly evident with hail claims ■ Unscrupulous contractors enhancing existing damage or manufacturing damage ■ Unscrupulous homeowners looking for a new roof etc ■ Know the signs ■ Haag ‘Composition Roofs Damage Assessment Field Guide’ for asphalt roofs ◆ http://bit.ly/1OBGPpY
- 34. Where to go from here? ■ The need to address the problem of mounting hail losses is acute ■ Increase in concentration of values in places like Alberta isn’t going to go away ■ Gaps in the research need to be addressed ◆ Homes ◆ Cars (i.e. hail blankets) ■ Near-term concentration on roofing, where we know the most and where most damage occurs ■ Need to incentivize IR roofing materials ■ Push for IR requirements in building codes
- 35. Where to go from here? ■ We know what we know (eg. Roofing) ■ We know where the gaps in research are ■ We know how to fill these gaps ■ We have the research facilities and know- how to fill these gaps ■ Need further research support