The Wall Street Journal: Building a Giant Lab to Test Disasters

The following article was published by The Wall Street Journal on October 19, 2010:

By Paul Glader

The insurance industry is doing its best to create a tempest in a teapot.

On Tuesday, the industry-funded Institute for Business & Home Safety will open a facility that breaks new ground in the world of disaster labs: replicating hurricane conditions on a large scale.

The $40 million research center, set on 90 acres in Richburg, S.C., features a massive test chamber as tall as a six-story building that can hold nine 2,300-square-foot homes on a turntable. Those homes can be subjected to tornado-strength winds generated by 105 giant fans. Mix in water from the 750,000-gallon tanks, and researchers can simulate Category 3 hurricanes.

With an update next year, “we’ll shoot hail down from the rafters of the building to simulate hail storms,” said Tim Reinhold, senior vice president of research at Tampa-based IBHS.

The goal is to improve building codes and maintenance practices in disaster-prone regions. Such labs, insurers say, help reduce their exposure to catastrophic losses-even at a cost of $100,000 for each large hurricane simulation.

IBHS’s new facility will give insurers the ability to carefully videotape what happens as powerful winds blow over structures. In the past, researchers largely relied on wind data from universities or computer simulations and rummaged through damage zones or photographed them from helicopters.

It is “the last link in a long chain of progress in hurricane loss prevention,” said Dr. Louis Gritzo, manager of research for FM Global, a larger insurer and one of IBHS’s members. Other insurers involved in the research facility include State Farm, Nationwide and AllState.

The center will also be used to test commercial buildings, agriculture structures, tractor-trailers, wind turbines and airplanes. “There are all kinds of things we can fit in there,” said Julie Rochman, chief executive of IBHS.

Property and casualty insurers are looking to reduce their risk on the $9 trillion in U.S. property exposed to hurricanes from Texas to Maine. Insured catastrophic losses were $7.9 billion in the first half of 2010, up $200 million from 2009, according to the Insurance Information Institute in New York.

Widespread damage caused by Hurricane Andrew in 1992 totaled $15.5 billion, according to the Insurance Information Institute, a harsh blow to insurers who didn’t know how to predict such damage was coming. There were “so many different ideas of what caused the damage and what could be done,” said Mr. Reinhold. “There was so much smoke.”

The property industry has been on a research craze for years, bringing science to bear on how buildings withstand natural disasters. Underwriters Laboratories Inc. in Northbrook, Ill., ignited parts of the World Trade Center flooring in a gas furnace after the Sept. 11 terrorist attacks to see how the flooring affected the building’s collapse.

The federal Bureau of Alcohol, Tobacco, Firearms and Explosives-part of the Justice Department- opened a $106 million facility in 2004 in Ammendale, Md., where it often burns buildings as part of arson investigations. Other organizations such as the National Association of Homebuilders and the National Institute of Science and Technology also test buildings.

FM Global spent $40 million last year to add earthquake simulations to its own 1,600-acre testing complex near West Glocester, R.I. There, it simulates fires, windstorms, earthquakes and explosions, with each simulation costing between $10,000 and $100,000.

The company said the lab work makes a difference in real emergencies. The firm insured 500 sites, worth $42 billion, in the path of Hurricane Katrina in 2005. The company said 310 sites followed FM Global’s engineering recommendations and saw 85% less damage on average, saving $1.5 million per property.

In recent months, FM Global has been testing ethanol processing facilities in its lab to understand how and when such facilities might burst into flames. “We created a worst-case scenario right under our roof,” Mr. Gritzo said.

Disaster labs generally document and share their findings. FM Global’s research campus staff of 125 makes its recommendations publicly available and many are picked up by governments, standards organizations and other companies world-wide. Labs in China are also springing up, adding to the body of research in disaster science.

The insurance industry has often lobbied for tougher building codes. The IBHS offers a seal of approval for homes built to standards that exceed building code requirements. Characteristics include roofs that resist wind damage, proper coverings for windows, and high-quality connectors to hold a building together.

The new IBHS lab will be the first to replicate hurricanes with winds channeling water through homes and ripping off roofs, doors and windows. The center can also replicate wild fires.

“We can throw embers into the channel and introduce them into the wind field much like a wild fire,” said Joseph King, a spokesman for the IBHS.

There are still disasters beyond the capabilities of the world’s labs. Tsunamis, for one. “You have to have an earthquake under the seabed to cause the tsunami itself,” Mr. King said. “We’re not able to do it and certainly don’t know anyone who can.”

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