Reducing Cat Risks

Wind Turbines Slow Down Hurricane Winds

Hurricane winds are dissipated by offshore wind farms.
By: | March 6, 2014 • 3 min read
Topics: Catastrophe | Energy
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Off the New York coastline would be a perfect place for an array of wind turbines, according to a Stanford professor. It would not only offer clean energy to the Big Apple but it would protect it the next time a Superstorm Sandy comes calling.

“If you have a large enough array of wind turbines, you can prevent the wind speeds [of a hurricane] from ever getting up to the destructive wind speeds,” said Mark Jacobson, a professor of civil and environmental engineering at Stanford University.

Computer models demonstrated that offshore wind turbines reduce peak wind speeds in hurricanes by up to 92 mph and decrease storm surge by up to 79 percent, said Jacobson, who worked on the study with University of Delaware researchers Cristina Archer and Willett Kempton.

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“The additional benefits are there is zero cost unlike seawalls, which would cost about $30 billion,” he said, noting that the wind turbines “generate electricity so they pay for themselves.”

The researchers studied three hurricanes, Sandy and Isaac, which struck New York and New Orleans, respectively, in 2012; and Katrina, which slammed into New Orleans in 2005. Generally, 70 percent of damage is caused by storm surge, with wind causing the remaining 30 percent, he said.

That’s why onshore wind farms would not be as effective, he said. While they would reduce the wind speed, they wouldn’t impact storm surge.

In 2013, one of the “most inactive” Atlantic hurricane seasons on record, insured losses totaled $920 million, according to Guy Carpenter, which relied on information from the Mexican Association of Insurance Institutions. The most noteworthy events were Hurricane Ingrid in the Atlantic and Tropical Storm Manuel in the Pacific, which displaced thousands as they caused excessive rainfall, flooding and mudslides.

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According to the Insurance Information Institute, Katrina was the costliest hurricane in insurance history, at $48.7 billion, followed by Andrew in 1992 at $25.6 billion and Sandy at $18.8 billion. Economic losses, of course, were much higher.

Wind turbines, which can withstand speeds of up to 112 mph, dissipate the hurricane winds from the outside-in, according to Jacobson’s study. First, they slow down the outer rotation winds, which feeds back to decrease wave height. That reduces the movement of air toward the center of the hurricane, and increases the central pressure, which in turn slows the winds of the entire hurricane and dissipates it faster.

The benefit would occur whether the turbines were immediately upstream of a city, or along an expanse of coastline. It could take anywhere from tens of thousands to hundreds of thousands of wind turbines off the coast to offer sufficient hurricane protection.

At present, there are no wind farms off the U.S. coastline, although 18 have been proposed for off the East Coast. Proposals have also been made for off the West Coast and the Great Lakes. There are 25 operational wind farms off the coast of Europe.

“Overall,” Jacobson and his colleagues concluded in the study, “we find here that large arrays of electricity-generating offshore wind turbines may diminish hurricane risk cost-effectively while reducing air pollution and global warming, and providing local or regionally sourced energy supply.”

Anne Freedman is managing editor of Risk & Insurance. She can be reached at [email protected]
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Energy Industry

‘Among the Largest Catastrophe Losses in Canadian History’

Business interruption losses from the Alberta fire will be "massive" according to experts.
By: | May 12, 2016 • 4 min read
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About 2,400 structures in and around Fort McMurray lie in ruins in the middle of 700 charred square miles of northern Alberta.

The oil sands boom town, once known as “Fort Make Money,” is now going to cost money — at least $4 billion (C$5 billion) by early estimates — to rebuild after a monster wildfire swept around and through parts of town the first week of May.

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The immediate insurance question is not the property loss in town; that is quite straightforward.

Rather, it is the length of the oil sands outage and two stages of business-interruption (BI) claims: immediate losses for the time out of operation, as well as possible contingent losses for refiners that rely on the oil sands for raw materials.

At the peak of the fire, 1 million barrels a day of oil sands production was taken out of service — about 40 percent of total output, and roughly one-quarter of all Canadian oil production.

Some operations have already airlifted in skeleton crews to begin safety checks in advance of resuming operations, but the bulk of production is expected to remain out of service for several weeks, if not a month or more.

The wildfires “will be a huge BI event,” said Paul Cutbush, senior vice president catastrophe management at Aon Benfield Analytics in Toronto.

“Even with no damage we will have to see when workers are allowed to come back — and then how many and how soon. A lot of these facilities have been used for evacuations, a goodwill gesture. A great deal will depend on manuscript wording for each policy.”

Waiting periods for BI claims will likely not be as large a factor as in past large losses, Cutbush noted. “It used to be that 90 days was standard. Today, that is shorter, 60 days, maybe even just 30.”

It may take longer than that to get claims sorted, because the size and scope of the fire has presented so many new unknowns.

“The biggest thing is getting people back to work,” said Cutbush, but they need places to live and shop.

“It is our understanding that a lot of the housing in the area was rental or temporary housing for oil sands and services workers.” That means not just property claims for the assets themselves, but lost value from their revenue.

Utilities and infrastructure also have to be inspected, repaired or replaced.

“There is also the issue of ash-contaminated water,” said Cutbush. “The Athabasca River is used for injection water, but ash can make the water caustic and not suitable for use without treatment.”Canadian Disaster Losses chart

The fires continue to rage uncontrolled, but are now in the deep boreal forest south and east of town. The evacuation order and state of emergency for the area remained in effect as of May 11.

During a press tour through the town, Alberta Premier Rachel Notley gave the first official estimate of initial recovery time: “First responders and repair crews have weeks of work ahead of them to make the city safe. I’m advised that we will be able to provide a schedule for return within two weeks.”

Official numbers said 88,000 people, were evacuated, but a local source puts the number closer to 100,000, counting transient workers.

Remarkably, there has been no loss of life, not even any major injuries. And the vast oil sands mining and processing operations that sprawl for more than 100 miles in every direction around Fort McMurray were undamaged.

On May 10, Notley met with industry officials and was told the operations were secure.

“The magnitude of the current destruction suggest that the new fires will generate among the largest catastrophe losses in Canadian history, affecting both personal and commercial property writers,” according to an initial evaluation by the ratings agency Moody’s.

“I suspect some of the [energy companies’ insurance] coverage may be on the lean side.” — Jason Mercer, assistant vice president and analyst, Moody’s

“Early estimates of the wildfires peg the cost of damages rising to C$5 billion or around 1.5 percent of Alberta’s GDP — an estimate that could increase,” Moody’s reported.

“The Fort McMurray fires destroyed four times as many buildings as the Slave Lake [Alberta] wildfire of May 2011, which cost Canadian property and casualty insurers more than C$700 million in pretax losses.”

“Home and auto insurance coverage in Canada is substantially similar to that in the U.S.,” said Jason Mercer, assistant vice president and analyst at Moody’s in Toronto, who co-wrote the report.

“The only notable difference is that some lines, such as workers’ compensation, are typically government issued.”

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BI is also similar in the two countries, Mercer noted. “There is named peril and all-risk. Both are available, but my sense is that all-risk is probably more difficult to get and more expensive, if only because of the higher number and cost of major losses in the province.

“More than half of the major losses in recent years in Canada have been in Alberta.”

Mercer also emphasized that the price of oil has been depressed for almost two years, leading some operators to tighten their belts – including insurance protection.

“I suspect some of the coverage may be on the lean side,” he said.

It will also depend whether companies have limited BI coverage — which would cover losses beginning with the evacuation and ending with the “all clear,” or extended coverage, which would “could run until there is a return to the profit level pre-event.”

Gregory DL Morris is an independent business journalist based in New York with 25 years’ experience in industry, energy, finance and transportation. He can be reached at [email protected]
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Sponsored Content by IPS

Compounding: Is it Coming of Age?

Prescription drug compounding is beginning to turn a corner in managing chronic pain.
By: | April 28, 2016 • 5 min read
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The WC managed care market has generally viewed the treatment method of Rx compounding through the lens of its negative impact to cost for treating chronic pain without examining fully the opportunity to utilize “best practice” prescription compounds to help combat the opioid epidemic this nation faces. IPS stands on the front lines of this opioid battle every day making a difference for its clients.  

After a shaky start cost-wise, prescription drug compounding is turning the corner in managing chronic pain without the risk of opioid addiction. A push from forward-thinking states and workers’ compensation PBMs who have the networks and resources to manage it is helping, too.

Prescription drug compounding has been around for more than a decade, but after a rocky start (primarily in terms of cost), compounding is finally coming into its own as an effective chronic pain management strategy – and a worthy alternative for costly and dangerous opioids – in workers’ compensation.

According to Greg Todd, CEO and founder of Integrated Prescription Solutions Inc. (IPS), a Costa Mesa, Calif.-based pharmacy benefit manager (PBM) for the workers’ compensation and disability market, one reason compounding is beginning to hit its stride is because some states have enacted laws to manage it more effectively. Another is PBMs like IPS have stepped up and are now managing compound drugs in a much more proactive manner from an oversight perspective.

By definition, compounding is a practice through which a licensed pharmacist or physician (or, in the case of an outsourcing facility, a person under the supervision of a licensed pharmacist) combines, mixes, or alters ingredients of a drug to create a medication tailored to the needs of an individual patient.

During that decade, Todd explains, opioids have filled the chronic pain management needs gap, bringing with them an enormous amount of problems as the ensuing addiction epidemic sweeping the nation resulted in the proliferation and over-consumption of opioids – at a staggering cost to both the bottom line and society at large.

As an alternative, compounded topical cream formulations also offer strong chronic pain management but have limited side effects and require much reduced dosage amounts to achieve effective tissue level penetration. In fact, they have a very low systemic absorption rate.

Bottom line, compounding provides prescribers with an excellent alternative treatment modality for chronic pain patients, both early and late stage, Todd says.

Time for Compounding Consideration

IPS_SponsoredContentThat scenario sets up the perfect argument for compounding, because for one thing, doctors are seeking a new solution, with all the pressure and scrutiny they’re receiving when trying to solve people’s chronic pain problems using opioids.

Todd explains the best news about neuropathic pain treatment using compounded topical analgesic creams is the results are outstanding, both in terms of patient satisfaction in VAS pain reduction but also in reduction potentially dangerous side effects of opioids.

The main issue with some of the early topical creams created via compounding was their high costs. In the early years, compounding, which does not require FDA approval, had little oversight or controls in place. But in the past few years, the workers compensation industry began to take notice of the solid science. At the same time, medical providers also were seeing the same science and began writing more prescriptions for compounding – which also offers them a revenue stream.

This is where oversight and rigor on the part of a PBM can make a difference, Todd says.

“You don’t let that compounded drug get dispensed when you’re going to pay for it without having a chance to approve it,” Todd says.

Education is Critical

IPS_SponsoredContentAt the same time, there is the growing, and genuine, need to start educating the doctors, helping them understand how they can really deliver quality pain management to a patient without gouging the system. A good compounding specialty pharmacy network offering tight, strict rules is fundamental, Todd says. And that means one that really reaches out to work with the doctors that are writing the prescriptions. The idea is to ensure that the active ingredients being chosen aren’t the most expensive sub-components because that unnecessarily will drive the cost of overall compound “through the ceiling.”

IPS has been able to mitigate costs in the last couple years just by having good common sense approach and a lot of physician outreach. Working with DermaTran Health Solutions and its national network of compounding pharmacies, IPS has been successfully impacting the cost while not reducing the effectiveness of a compounded prescription.

In Colorado, which has cracked down on compounding profiteering, Legislative change demanded no compound could be more than $350.00 period. What is notable, in an 18-month window for one client in Colorado, IPS had 38 compound prescriptions come through the door and each had between 4 and 7 active ingredients. Through its physician education efforts, IPS brought all 38 prescriptions down 3 active ingredients or less. IPS also helped patients achieve therapeutic success (and with medical community acceptance). In that case, the cost of compound prescriptions was down to an average of $350, versus the industry average of $788. Nationwide IPS has reduced the average cost of a compound prescription to $478.00.

Todd says. “We’ve still got a way to go, but we’ve made amazing progress in just the past couple of years on the cost and effective use of compound prescriptions.”

For more information on how you can better manage your costs for compound prescriptions, please call IPS at 866-846-9279.

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This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with IPS. The editorial staff of Risk & Insurance had no role in its preparation.




Integrated Prescription Solutions (IPS) is a Pharmacy Benefit Management (PBM) and Ancillary Services partner to W/C and Auto (PIP) Insurance carriers, Self Insured Employers, and Third Party Administrators who specialize in Workers Compensation benefits management.
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