Monthly Archives: September 2005

The Spanish Armada: Control of Commerce Through Decentralization

At the Texas Regional Infrastructure Security Conference last week, I heard Howard Schmidt speak. He mentioned the Spanish Armada.

Doubtless you all remember that in 1588 King Philip II of Spain sent a huge fleet of ships to conquer the England of Elizabeth I (130 ships and 30,000 men), but weather and other circumstances intervened and the invasion failed. Many factors led to this invasion, ranging from Elizabeth not having married Philip like her sister Mary had done, to Elizabeth like her father Henry VIII being a Protestant and Philip being a Catholic with authorization from the Pope to go take back England for Holy Mother Church, not to mention the usual great power land-acquisition game that was popular at the time; Philip already owned large chunks of Europe through the inheritance and marriage policies of his Hapsburg family, and large parts of the New World through conquest.

Howard Schmidt went straight to an even more basic reason: control of commerce. Continue reading

Rita Cat Bonds

As noted previously, Hurricane Katrina seems unlikely to trigger any catastrophe bonds to pay out. Hurricane Rita could be different:

"Cat bonds have been largely untested until these hurricanes in the U.S., so the industry will be watching Rita very carefully," said Rene Cotting, a specialist in insurance-linked securities at ABN AMRO. "It’s possible some bonds will get hit."
Catastrophe bonds face test with Rita Fri Sep 23, 2005 11:22 AM ET By David Wigan LONDON (Reuters)

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NOLA levees not overtopped?

News stories have said that Hurricane Katrina was a cat 4 and New Orleans levees were built to withstand a cat 3. However, Katrina made landfall quite a bit east of New Orleans, which meant that NOLA did not get cat 4 winds, rains, or flood surges. It turns out that the surge was 11 feet and the floodwalls were supposed to handle 14 feet.

But with the help of complex computer models and stark visual evidence, scientists and engineers at Louisiana State University’s Hurricane Center have concluded that Katrina’s surges did not come close to overtopping those barriers. That would make faulty design, inadequate construction or some combination of the two the likely cause of the breaching of the floodwalls along the 17th Street and London Avenue canals — and the flooding of most of New Orleans.
Experts Say Faulty Levees Caused Much of Flooding By Michael Grunwald and Susan B. Glasser Washington Post Staff Writers Wednesday, September 21, 2005; Page A01

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Highways or parking lots?

All highways going north from Houston as Hurricane Rita approaches currently look more like parking lots than highways, in Houston traffic cameras.

Would it be a good idea to include in an evacuation plan that inbound sides of highways will be converted to outbound during the evacuation?

At least everyone does seem to be evacuating a day in advance.


Katrina cat bonds

Immediately after Hurricane Katrina, reports were that catastrophe bonds for hurricanes probably would not be triggered.

Standard & Poor’s has ratings outstanding on $4.25 billion of natural peril catastrophe bonds. Of this, $1.61 billion carries an exposure to North Atlantic hurricanes, generally covering the Gulf and Eastern Seaboard states from Texas to Maine.
Catastrophe bonds not likely to attach, S&P’s reports 8/30/2005

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Insured Cost of Katrina: up from $30B to $40B

According to a U.S. Congressional Budget Office (CBO) estimate of 6 Sept, the insured cost of Hurricane Katrina could exceed $30 billion. According to Swiss Re on 12 Sept., the insured cost is probably actually $40 billion. That makes Katrina the most costly disaster ever for insurers, higher than the $35 billion for Hurricane Andrew in 1992,
$32.5 billion for 9/11, or $15-$20 billion for the 1994 Northridge Earthquake in Los Angeles.

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It Can’t Happen Here

Lately I’ve seen a lot of ink and bits spilled about whether to move New Orleans.  NOLA is unique, because it is mostly below sea level. It is also part of an industrial corridor sometimes called the American Ruhr.  And it is the port for a third of the U.S.  And the whole levee system is an artificial attempt to contain a river that naturally changes course every so often.  All those points are worth separate discussion.

But here I’d like to address the underlying assumption of many people who suggest moving New Orleans: that it can’t happen here, here being wherever the writer is.

Let me pick on Boston.  Everyone knows that Boston never gets serious hurricanes, right? Yet downtown Boston is surrounded on three sides by water and has a typical elevation of about 20 feet.  Boston’s Back Bay is built on landfill about that high above the Charles River, and might subside if flooded. Then there’s the Big Dig, which undermines numerous buildings; what would it do if completely flooded? Plus Bostonians aren’t used to preparing for hurricanes.

The Great Colonial Hurricane

Yet it can happen here.  It has, in August 1636, with with 20 foot ocean surge.

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Insured Cost of Katrina

According to the Congressional Budget Office (CBO) on 6 Sept., the current estimate for private insurance payouts due to Hurricane Katrina is more than $30 billion dollars. This is not counting federal flood insurance and federal crop insurance, both of which will probably exceed currently allocated funding. Private insurance paid $32.5 billion after 9/11. Hurricane Andrew of 1992 cost about $35 billion in insurance. The Northridge earthquake of Los Angeles in 1994 that prompted catastrophe bonds cost somewhere between $15 and $20 billion.

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Airline Volunteers

Here’s a Katrina story I haven’t heard tied together anywhere: airline volunteers.
“None of the airlines involved required a contract or any written guarantee of payment before sending their planes and volunteer crews,” Simon wrote of the American Airlines flights. “One official said if Gore promised to pay, that was good enough for them.”
Gore airlifts victims from New Orleans Former vice president chartered two private aircraft Saturday, September 10, 2005; Posted: 7:22 a.m. EDT (11:22 GMT)
KNOXVILLE, Tennessee (AP) — Al Gore helped airlift some 270 Katrina evacuees on two private charters from New Orleans, acting at the urging of a doctor who saved the life of the former vice president’s son.
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