Study Says Coastal Regions Have Billions at Risk From Storm Surge
Cities along the U.S. East and Gulf Coast are vulnerable to billions in insured losses as a result of storm surge and insurers need to address the issue quickly, according to a new report from First American Insurance Corp.
“Insurers are largely abandoning the coastal market,” says a report from First American Spatial Solutions. “Yet as coastal population density continues to grow, so does the need for insurance coverage.”
Storm surge is most commonly defined as wind-driven waves that are pushed ashore during a coastal windstorm and produce heavy flooding.
Since coastal properties are often covered for wind (but not flood) damage, class-action lawsuits following 1995’s Hurricane Katrina resulted in millions in unanticipated losses for several property insurers.
“Companies that can accurately identify low-risk coastal properties can provide a valuable service, while reaping handsome profits,” the report says. “But to seize this opportunity, insurers must be able to reliably determine the risk of catastrophic hurricane loss.”
Of the coastal regions included in the study, the Miami/Dade region of Florida has the highest exposure to potential losses from storm surge. The study says that over $53 billion in losses impacting over 250,000 properties could occur if a category 5 hurricane struck the densely populated metropolitan area.
The region is not unfamiliar with the destruction from storm surge. The report explains that a 17-foot storm surge was measured in 1992 during Hurricane Andrew, which was responsible for $25.5 billion in damage.
Even Hurricane Katrina, which reached the region as a category 1 hurricane, had a three- to five-foot storm surge that was responsible for $1 billion to $2 billion in damage.
Other areas included in the report also are at risk for large storm surge losses, such as Virginia Beach, Va. ($39.5 billion); Tampa, Fla. ($33 billion) and Houston/Galveston, Texas ($20 billion).
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