According to the latest report from modeling, data and analytics firm CoreLogic the total value of residential property at risk of hurricane storm surge damage is now estimated at $1.1 trillion. The report contains updated estimates for both the number and value of single-family homes exposed to hurricane-driven storm-surge damage within the United States.
This years report counts 4.2 million homes along the U.S. Atlantic and Gulf Coasts which are exposed to storm surge risk with the total value of those properties estimated at over a trillion dollars. The 2013 report findings increase both the number of properties at risk and the total value signficantly.
In its 2012 report, which we covered last year here, CoreLogic indicated that there were just over 4 million homes across the U.S. at risk from hurricane induced storm-surge damage with over $700 billion in total property exposure. So the number of homes at risk has jumped by around 200,000 and the value of property at risk has jumped by $400 billion to now stand at an estimated $1.1 trillion.
The CoreLogic Storm Surge Report, which it publishes annually, breaks down residential property risk along the Atlantic and Gulf coasts at national, regional, state, metro and ZIP code levels. The 2013 report features an enhanced methodology using CoreLogic Automated Valuation Model (AVM) data that improves the accuracy of the analysis, hence the increase in figures. Interestingly, for 2013 the report also attempts to estimate the potential increase in risk and exposure that could be caused by theoretical future rises in sea level.
“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,” commented 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.”
Unsurprisingly the New York metropolitan region has the largest concentration of exposed, high value properties to hurricane driven storm surge, something the reinsurance industry learnt last year from hurricane Sandy. The area, which includes New Jersey and Long Island, is not only home to the highest number of properties at risk of storm-surge damage, but also the highest total value of residential property exposed, at over $200 billion.
In fact, more than $658 billion of the $1.1 trillion of the property value at risk is attributed to just ten major metro areas. New York leads the way with the $205 billion, followed by Miami at $100 billion, Virginia Beach, North Carolina at $73 billion, Tampa, Florida at $55 billion and New Orleans at $43 billion, making up the top five metropolitan cities at risk of storm surge.
On a state level, Florida continues to lead the way with an enormous 1.5 million properties at risk and $386 billion in total potential exposure to damage. Second is New York state, with $135 billion at risk, New Jersey with $118 billion, Virginia with $78 billion and Louisiana with $72 billion of exposed property.
The issue of rising sea levels is shown to have a huge impact on the exposure totals and number of properties at risk. For the Miami area, a one-foot rise in sea level could mean that the total properties at risk would nearly double from just under 132,000 to almost 340,000, and the estimated value of properties at risk would increase from an estimated $48 billion to more than $94 billion. Factor sea-level rises into the equation across the entire U.S. and it’s clear that even a sea-level rise of a few inches would create additional exposure in the many tens of billions of dollars.
“One recurring question in storm-surge analysis is whether or not climate change is affecting the development of hurricanes and causing an increase in the frequency or intensity of these events,” said Botts. “Though the CoreLogic Storm Surge Report is not designed to address that specific question, we do consider a potential rise in sea level as a crucial contributing factor to the full extent of coastal storm-surge risk and have expanded the analysis to include projected increases in risk associated with a hypothetical one-foot, two-foot and three-foot rise. The geographic location and characteristics of an urban area along the coast will naturally contribute greatly to the level of risk resulting from a potential sea-level rise, as is the case in Miami with lower elevation and close proximity to ocean water.”
The report serves as a timely reminder that the Atlantic hurricane season is not all about wind. The destructive forces of wind and water combined, creating storm surges, have the potential to cause as much, if not more, damage than high winds if the conditions align to create the worst possible scenarios. The figures used in the report are for total damage replacement costs, so are greater than the insurance industry exposure, however the exposure to storm surge is huge and insurers and reinsurers need to be very aware of this risk.
The catastrophe bond market is also exposed to storm surge as U.S. wind and hurricane cat bonds will also cover damage caused by surge in most cases. There are no cat bonds which solely cover surge at the moment, although it is possible that we could see such transactions in the future. With the amount of exposure to storm surge being so high at $1.1 trillion the capital markets will certainly continue to have a very important role to play in providing risk transfer capacity for this peril.
You can access the full report via the CoreLogic website: 2013 CoreLogic Storm Surge Report.
Keep in touch with the U.S. hurricane season as it develops with our 2013 Atlantic Hurricane Season page.