Coastal property worth $17 trillion awaits next Sandy

Posted on Written by Bill Sisson
Bill Sisson

On the 70th anniversary of the 1938 hurricane, catastrophe risk modeling firm Risk Management Solutions produced a comprehensive analysis and report of that seminal storm titled: “The 1938 Great New England Hurricane: Looking to the Past to Understand Today’s Risk.” The 2008 report is available online and is well worth reading.

In the analysis, the authors conclude prophetically, “A major hurricane will strike New England again; only uncertainty in the size and timing of the event remains. … It is imperative to educate communities on the potential impacts and to prepare well in advance of an impending storm.”

In that context, Hurricane Sandy was not so much an “if” as it was a “when.”

A new tally on the storm’s toll is in. On Feb. 12, the National Hurricane Center released a report calling Sandy the deadliest hurricane to hit the Northeast in 40 years and the second-costliest storm in U.S. history. The hurricane center concluded that Sandy caused 72 U.S. deaths from Maryland to New Hampshire, the most in the Northeast since Hurricane Agnes killed 122 people in 1972.

Damage is estimated at a whopping $50 billion, second only to Hurricane Katrina, which caused about $108 billion in destruction ($128 billion adjusted to 2012 dollars). For comparison, Hurricane Andrew, a Category 5 storm, caused about $26.5 billion in damage when it ripped across Florida in 1992 — the equivalent of about $44 billion today.

The report says Sandy damaged or destroyed more than 650,000 homes in this country and that more than 8 million people lost power.

In terms of recreational marine losses, no storm in history has caused more damage. BoatUS estimates the loss in boats alone at more than $650 million, with roughly 65,000 damaged or destroyed. It estimates the damage to marinas, boatyards and yacht clubs in the “hundreds of millions of dollars.”

BoatUS and the Association of Marina Industries are hosting three online webinars — on March 5, 12 and 26 — at 2 p.m. EST, aimed at the marina industry.

Numbers, of course, only tell part of the story.

Catastrophe risk assessment expert Karen Clark told the Boston University website BU Today that although Hurricane Sandy was unusual from a meteorological standpoint, the damage it caused was neither unexpected nor unprecedented.

“The 1938 Great New England Hurricane, also known as the Long Island Express, would cause losses three times higher than Sandy if it occurred today — for both insured and total economic losses,” says Clark, who developed the first hurricane catastrophe model and founded in 1987 the industry’s first catastrophe modeling company, Applied Insurance Research. “By focusing on meteorology we give the false impression that we haven’t seen anything like Sandy before and we’re not going to see this type of destruction again — both very wrong and dangerous assumptions.”

The president and CEO of Karen Clark & Co. told the university website that it is wrong and counterproductive to attribute recent storms to climate change “because it allows us to ignore real issues and actions” to prevent future losses.

“By attributing every major loss to global warming we’re ignoring the elephant in the room — the amount of property value accumulating in coastal communities that is vulnerable to natural hazards,” she told the interviewer. “By our estimates there is nearly $17 trillion of property exposure in coastal counties along the Gulf and East coasts today. … With this amount of property value so close to the water’s edge, even minor storms are now causing billion-dollar losses.”

The future? The inference drawn from looking at data during the past three decades suggests we are in for more heavy weather.

The large reinsurance firm Munich Re released a study last fall showing that North America has been the area of the world most affected in recent decades by what it called “extreme” weather events.

“Nowhere in the world is the rising number of natural catastrophes more evident than in North America,” according to a press release that accompanied the report, “Severe Weather in North America.”

“The study shows a nearly quintupled number of weather-related loss events in North America for the past three decades. … Climate change particularly affects formation of heat waves, droughts, intense precipitation events and in the long run, most probably also tropical cyclone intensity.”

A silver lining?

For starters, the lessons learned from Sandy will undoubtedly result in better-engineered, better-built marinas, which will include everything from proper materials and piling height (the taller the better) to pre- and post-storm planning, says Steve Ryder, manager of project development for Bellingham Marine.

“You get complacent over the years from not having storms, and then Mother Nature reminds you you are on the waterfront,” Ryder says, adding that there is no such thing as a “hurricane-proof” marina. Sandy certainly erased any complacency in the Northeast.

This is a subject we will be covering for some time. For now, I conclude with a few words of wisdom from Phillip Greenman, executive vice president at Bellingham Marine: “We always tell our customers that the last three feet of piling you buy will be the cheapest.”

This article originally appeared in the March 2013 issue.

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