Coastal Property


Some 6.5 million U.S. homes with a total reconstruction value of nearly $1.5 trillion are at risk of damage from hurricane-driven storm surge, and more than $986 billion of that risk is concentrated in 15 metro areas, according to an annual report by CoreLogic.

The 2014 analysis by CoreLogic found that by state, Florida ranks number one for the number of homes at risk, with nearly 2.5 million homes and $490 billion in total projected reconstruction costs.

At the local level the New York metropolitan area (including northern New Jersey and Long Island) contains not only the most number of homes at risk for potential storm surge damage (687,412), but also the highest total reconstruction value of residential homes exposed, at more than $251 billion.

Ranked second among the major metropolitan areas at risk is Miami, Florida with 562,410 homes exposed and a total reconstruction value of $103.2 billion, followed by Tampa, Florida with 444,765 homes at risk and a total reconstruction value of $79.1 billion.

CoreLogic makes the point that just one storm of sufficient intensity occurring in or near one of the major metropolitan areas in the report is all that would be needed to cause tens of billions in property damage:

Past hurricane seasons have demonstrated the impact that just one storm of sufficient severity, located in exactly the wrong place, can achieve. Andrew, Katrina, and finally Sandy are still reminders that it takes no more than one hurricane roaring through a metropolitan and densely populated area to cause widespread property damage and threaten lives.”

CoreLogic goes on to explain that extensive regions along both the Gulf and Atlantic Coasts are vulnerable to storm surge, and yet many of the homeowners who live in these areas are not required to carry flood insurance because they are not located within a designated FEMA 100-year floodplain.

Since standard homeowners insurance excludes flood losses from either fresh or salt water, homeowners who are not located in FEMA Special Flood Hazard Areas, but are in high-risk surge zones, often do not consider buying National Flood Insurance Program (NFIP) coverage for their properties.”

With just over a week to go until the start of the 2014 Atlantic hurricane season, NOAA’s outlook is hot off the press and garnering a lot of attention.

Here’s NOAA’s take on the season by the numbers:

● NOAA is calling for a 50 percent chance of a below-normal season, a 40 percent chance of a near-normal season, and only a 10 percent chance of an above-normal season.

● NOAA predicts a 70 percent likelihood of 8 to 13 named storms (winds of 39 mph or higher), of which 3 to 6 could become hurricanes (winds of 74 mph or higher), including 1 to 2 major hurricanes (Category 3, 4 or 5; winds of 111 mph or higher).

● These numbers are near or below the seasonal averages of 12 named storms, six hurricanes and three major hurricanes, based on the average from 1981 to 2010.

What are the reasons behind NOAA’s predictions for a near-normal or below-normal season?

A key driver of this year’s outlook is the anticipated development of El Niño this summer that is expected to cause stronger wind shear which reduces the number and intensity of tropical storms and hurricanes.

Cooler Atlantic Ocean temperatures this season also suggest fewer hurricanes, NOAA says.

Despite the prognosis for a below-normal or near-normal season, it’s important that coastal residents don’t underestimate the hurricane threat. As Dr. Kathryn Sullivan, NOAA administrator says:

Even though we expect El Niño to suppress the number of storms this season, it’s important to remember it takes only one land falling storm to cause a disaster.”

Note: NOAA’s seasonal hurricane outlook is not a hurricane landfall forecast and does not predict how many storms will hit land or where a storm will strike.

For a round-up of the latest predictions from the major hurricane forecasters check out this post at Dr. Jeff Masters’ Wunderblog.

Check out I.I.I. facts and statistics on hurricanes here.

Hurricane forecasters are sounding a warning bell for the U.S. East coast in their latest predictions for the 2014 hurricane season, even as overall tropical storm activity is predicted to be much-less than normal.

WeatherBell Analytics says the very warm water off of the Eastern Seaboard is a concern, along with the oncoming El Niño conditions.

In its latest commentary forecaster Joe Bastardi and the WeatherBell team notes:

We think this is a challenging year, one that has a greater threat of higher intensity storms closer to the coast, and, where like 2012, warnings will frequently be issued with the first official NHC advisory.”

WeatherBell Analytics is calling for a total of 8 to 10 named storms, with 3-5 hurricanes and 1-2 major hurricanes.

According to WeatherBell, there have been plenty of El Niño years with high impact seasons for the U.S. coast: 1957, 1965, 1969, 1976, 1983 (fading but still there), 1991, 1992, 2002, and 2004.

The forecasters say this pattern favors stronger storms (relative to normals) in-close to the U.S. rather than in the deep tropics which will have less to much-less than normal activity this year.

There is nothing to prohibit another Sandy-type hit from the southeast or three storms up the East Coast in one year despite a relatively low number of named storms in a season.”

Check out this post by Eric Holthaus over at Slate’s Future Tense blog for his take on how this year’s El Niño could grow into a monster.

Meanwhile, London-based consortium Tropical Storm Risk (TSR) has lowered its forecast and predicts Atlantic hurricane activity in 2014 will be about 25 percent below the 1950-2013 long-term norm and about 40 percent below the recent 2004-2013 10-year norm.

In its updated forecast TSR is calling for 12 named storms, 5 hurricanes and 2 major (Category 3 and higher) hurricanes.

TSR says two key factors in its forecast for below-normal activity are: lighter trade winds over the Caribbean and North Atlantic coinciding with the likely development of a moderate El Niño; and cooler than normal sea surface temperatures in the tropical North Atlantic.

TSR says both these predictors will have a moderately suppressing effect on activity.

A post over at Artemis blog points out that while El Niño typically results in a below average hurricane season in terms of the number of storms that form, that is no guarantee of a benign season in terms of catastrophic losses as that is down to the strength or severity and path of any storms that do form.

Updated forecasts will be released around June 1, when hurricane season opens.

Check out I.I.I. facts and statistics on hurricanes.

As the 2013 Atlantic hurricane season comes to a close, it may be easy to dismiss the significance of this year’s season.

While it’s true that this year had the fewest number of hurricanes since 1982, the 2013 hurricane season was only the third below-normal season in the last 19 years, since 1995, when the current high-activity era for Atlantic hurricanes began, according to forecasters.

A NOAA press release quotes Gerry Bell, lead seasonal hurricane forecaster at NOAA’s Climate Prediction Center, a division of the National Weather Service:

A combination of conditions acted to offset several climate patterns that historically have produced active hurricane seasons. As a result, we did not see the large numbers of hurricanes that typically accompany these climate patterns.”

A total of 13 named storms formed in the Atlantic basin this year, NOAA reports, but only two, Ingrid and Humberto, became hurricanes. Neither of these storms became a major hurricane (Category 3, winds of 111-129 mph and above).

Although the number of named storms was above the average of 12, the numbers of hurricanes and major hurricanes were well below their averages of six and three, respectively.

Meanwhile, the Insurance Information Institute (I.I.I.) and the Florida Insurance Council (FIC) remind us that while Florida has escaped hurricane damage for eight consecutive years, insurers are prepared for the state’s severe weather history to repeat itself.

Check out I.I.I. facts and statistics on hurricanes.

While the size of the residual property market in hurricane-exposed states in 2012 declined from the peak in exposure value and policy counts seen in 2011, the market overall remains at near-record levels, the Insurance Information Institute (I.I.I.) says.

In an updated report Residual Market Property Plans: From Markets of Last Resort to Markets of First Choice, the I.I.I. notes that exposure to loss in the residual property market totaled $818.1 billion in 2012 with total policies in-force of 3.23 million.

This compares with total exposure to loss of $884.7 billion and total policies in-force of 3.3 million in 2011.

The I.I.I. notes that today, overall exposures in the residual property market appear to have stabilized somewhat and many of the plans are underwriting profitably.

Legislative reform passed in some of the most at-risk markets, for example the state of Florida, has contributed to an improvement in the overall financial position of the plans, it says.

Diminished hurricane activity in recent years in areas like Florida has been another positive factor.

The I.I.I. warns:

But, while hurricane activity in the most exposed states may have been lower in recent years, there is no question that over the long-term major hurricanes will cause extensive damage in future. This highlights how important it is for the rates charged by these plans to be actuarially sound.”

Despite attempts by certain states to reduce the size of their plans, the fact of the matter is that this market of last resort remains the market of first choice for many vulnerable, high-risk coastal properties, the I.I.I. says.

 

As we approach the peak of hurricane season, catastrophe modeler RMS has warned that storm surge poses a greater risk than hurricane wind.

RMS says its updated North American hurricane model shows there is a 20 percent chance that storm surge loss will be greater than wind loss for any U.S. hurricane that makes landfall. And for the northeast coast of the U.S. the risk is even higher.

Dr. Claire Souch, vice president, model solutions at RMS says:

Our model shows there is a 20 percent chance that storm surge loss will be greater than wind loss for any U.S. hurricane that makes landfall, which rises to almost 40 percent along the northeast coast of the United States – this is a risk the market can no longer afford to ignore.”

RMS’ updated North Atlantic hurricane model suite includes the ability to fully quantify the risk from catastrophic hurricane-driven storm surge.

An earlier paper by RMS on Superstorm Sandy made the point that storm surge loss can drive more insurance loss than hurricane wind.

In the paper RMS noted that while Sandy was not even classified as a hurricane at landfall, it caused a Category 2 storm surge in New York City:

This is not the first time that storm surge has had a dominant effect. It was responsible for more than half of the total loss from 2005’s Hurricane Katrina, which was a Category 3 storm at landfall, but had a Category 5 equivalent storm surge.”

Recent analysis by CoreLogic estimates that more than 4.2 million U.S. residential properties are exposed to storm-surge risk valued at roughly $1.1 trillion, with more than $658 billion of that risk concentrated in 10 major metro areas.

According to I.I.I. facts and stats on flood insurance, Hurricane Sandy was the second costliest U.S. flood, based on National Flood Insurance Program (NFIP) payouts as of July 12, 2013.

A steady rise in the number and value of exposed properties along the U.S. Gulf and East Coasts continues – and remains the largest factor increasing the hurricane risk of property insurers today, according to catastrophe modeling firm AIR Worldwide.

AIR just released an updated version of its report The Coastline at Risk, showing that the insured value of residential and commercial properties (the replacement value or cost to rebuild) in coastal counties now exceeds $10 trillion.

In coastal counties of Florida and New York, values approach $3 trillion in each state.
AIR notes:

In the past five years, the insured value of properties in coastal areas of the United States increased at a compound annual growth rate of just under 4 percent. Indications are that, as the economy recovers, the rate of growth will pick up. At a historical rate of 7 percent, the total values insured would double every decade.”

Overall, AIR estimates that some 38 percent of the total exposure in Gulf and East coast states is located in coastal counties. This exposure accounts for nearly 16 percent of the total value of properties in the U.S.

New York edges Florida as the state with the highest coastal property values, at over $2.9 trillion, but Florida has the largest proportion of its value in coastal counties at 79 percent.

More on this story from Claims Journal.

Check out additional facts and statistics from the I.I.I. on hurricanes.

An annual report from CoreLogic reveals that the number and value of total properties along the Atlantic and Gulf coasts at risk of hurricane-driven storm surge is increasing significantly.

In its 2013 analysis CoreLogic estimates that more than 4.2 million residential properties are exposed to storm-surge risk valued at roughly $1.1 trillion, with more than $658 billion of that risk concentrated in 10 major metro areas.

Florida tops the state rankings with nearly 1.5 million properties at risk and $386 billion in total potential exposure to damage.

Louisiana ranks second in total properties at risk with just over 411,000 homes in storm-surge zones, while New York ranks second in total value of coastal properties exposed at nearly $135 billion.

At the local level, the New York metropolitan area, which encompasses northern New Jersey and Long Island as well, contains not only the highest number of homes at risk for potential storm-surge damage, but also the highest total value of residential property exposed, at more than $200 billion.

CoreLogic makes the point that extensive regions along both the Gulf and Atlantic coasts are vulnerable to storm surge, and yet the homeowners who live in these areas are not required to carry flood insurance because they are not located within a designated FEMA 100-year floodplain.

It says:

Homeowners who live outside of the FEMA Special Hazard Flood Areas (SFHA), especially in the Northeast, would have little reason to carry flood insurance, given that they may not be aware of the risk storm surge poses to their properties.”

For that reason, fully understanding the number and value of homes at risk of sustaining storm-surge damage allows insurance providers to improve underwriting policies and procedures.”

CoreLogic notes that public awareness of the risk hurricane-driven storm surge poses to coastal homeowners has never been higher coming off the heels of Hurricane Sandy last fall.

A press release quotes Dr. Howard Botts , vice president and director of database development for CoreLogic Spatial Solutions:

Sandy was a harsh reminder of the potential destruction associated with storm-surge flooding, and of just how many communities are vulnerable to that risk, in areas typically assumed to be relatively safe from hurricanes along the northeastern Atlantic shoreline.”

According to I.I.I. facts and statistics on flood insurance, Hurricane Sandy was the sixth costliest U.S. flood, based on National Flood Insurance Program (NFIP) payouts as of March 7, 2013.

An active 2013 Atlantic hurricane season appears likely based on the latest predictions of the major forecasters.

In its just-released forecast, Colorado State University’s Tropical Meteorology Project is predicting 18 named tropical storms, including nine hurricanes and four major hurricanes (Category 3-4-5).

The CSU team also put the probability of U.S. major hurricane landfall at about 140 percent of the long-period average. It says:

We anticipate an above-average Atlantic basin hurricane season due to the combination of an anomalously warm tropical Atlantic and a relatively low likelihood of El Niño. Coastal residents are reminded that it only takes one hurricane making landfall to make it an active season for them, and they need to prepare the same for every season, regardless of how much activity is predicted.”

Meanwhile, London-based consortium Tropical Storm Risk is calling for 15 named storms, of which it predicts eight will become hurricanes, and three major hurricanes. TSR forecasts Atlantic basin tropical cyclone activity at about 30 percent above the 1950-2012 long-term norm, but slightly below the recent 2003-2012 10-year norm.

And Weather Services International just issued its forecast of 16 named storms, nine hurricanes and five intense hurricanes, but added that this still may be a bit conservative if the warm tropical ocean temperatures persist heading into the season.

Updated forecasts will be released around June 1, when hurricane season opens.

Artemis blog has a great round-up of the latest forecasts on its 2013 Atlantic Hurricane Season page.

Also check out this recap of the 2012 hurricane season, courtesy of NOAA Visualizations:

Catastrophe and risk modeling firm Karen Clark & Co (KCC) has just released a timely report on increasing concentrations of property values in the United States.

The report finds that insured building values in the U.S. now exceed $40 trillion, including residential, commercial and industrial structures. When you add in contents and time element exposures, that figure doubles to over $80 trillion.

A key takeaway is that of the $80 trillion in total U.S. property exposure, nearly $15 trillion is in the Gulf and Atlantic coastal counties most exposed to hurricane risk.

Coastal property exposures are highest in New York ($4.938 billion), Florida ($3.305 billion), Texas ($1.446 billion), Massachusetts ($1.152 billion) and New Jersey ($1.109 billion), according to KCC’s analysis.

Overall, the state with the most insured property value is California, followed by New York and Texas. The top 10 states account for over 50 percent of the U.S. total.

Five counties each have over $1 trillion of exposure with Los Angeles, CA, New York, NY and Cook, IL leading the way. The top 10 counties account for 15 percent of the U.S. total.

The latest industry exposure data comes from KCC’s RiskInsight risk management platform. Insurers and reinsurers use this database for risk management and strategic planning.

Artemis blog has more on the findings.

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