Hurricane Risk Rising Along with Property Values; Sea Levels

Take the growing number and value of coastal properties, add in rising sea levels and you have a recipe for a major and increasing risk associated with hurricane storm surge, a recent AIR Worldwide report outlines.

“Because hurricane storm surge—which is an abnormal and often substantial increase in sea level—can penetrate miles inland from the coast, considerable value is at risk, as it seems the appetite for ocean views is unabated,” the report states.

AIR says in “The Growing Value of U.S. Coastal Property at Risk” that the largest risk factor is increasing property value along the U.S. coastline.

“People love living by the sea for the many economic and recreational opportunities coastal living offers,” AIR says, noting that 14 of the world’s 17 largest cities are along coasts.

In the U.S., AIR notes the percentage of insured value in coastal counties has actually remained flat from 2004 to 2012 — 38 percent of the total exposure in Gulf and East Coast states, making up 16% of the total values of properties in the country — but the total insured values have increased considerably along with the increase across the country as a whole. For the 18 Gulf and East Coast states, estimated insured value along the coast grew from $7.2 trillion in 2004 to $10.6 trillion in 2012.

“Historically, the insured value of properties in coastal states has grown at an estimated compound annual rate of about 7%,” AIR says in the report. “That translates to a doubling every decade of insured values and potentially insured losses.”

Rising sea levels compound the hurricane risk to these Gulf and East Coast states because of the increased effects of storm surge. AIR says the oceans rose about 7.5 inches on average between 1901 and 2010 worldwide, “and the current global mean rate is very likely slightly more than 1/16 inch each year.”

AIR adds that much of the coastline for Gulf and East Coast states is less than 10 feet above mean sea level — and sinking in some cases due to natural geological movements and the extraction of underground stores of water, oil and gas.

These factors mean significant and growing hurricane risk for the coastal states. AIR says, “Storm surge is one of the principal causes of coastal inundation, and it can create severe devastation many miles inland in low-lying coastal regions. As sea levels rise, average high tides will become higher.

“The height achieved by any given storm surge above those high tide levels and the extent of inland inundation caused by it will increase.”

Currently, AIR estimates over $17 billion in insured property values for the 18 Gulf and East Coast states that fall within its maximum modeled surge extent.

“The rising level of the oceans, the growing coastal population, the additional development associated with it, and the possible increasing severity of storms mean that people and property are increasingly at risk,” AIR says, adding that coastal communities can deal with the issues in three ways:

• Defend the shoreline with man-made or natural barriers;
• Adapt by raising structures and infrastructure above projected flood levels;
• Retreat.

AIR notes manmade defenses can be expensive — often too expensive for less-affluent communities — and can disrupt natural shoreline processes.