Catastrophe risk modeller CoreLogic has estimated that nearly 8 million US homes with more than $1.9 trillion in combined reconstruction value (RCV) are at risk of storm surge during the 2021 hurricane season.
The analysis includes both single and multifamily residences along the Gulf and Atlantic coasts, and also shows that more than 31 million homes with nearly $8.5 trillion in combined RCV have moderate or extreme risk exposure to hurricane winds.
With a record high of 30 named storms in the 2020 Atlantic hurricane season and the larger looming impact of climate change, CoreLogic is urging insurers and lenders to prepare for an unpredictable season by shifting the focus from loss adjudication to loss prevention and avoidance.
“To provide a 360-degree view of the impact of climate change, we took a look at the U.S. housing economy after a hurricane strikes and noticed a significant spike in mortgage delinquency rates and loss in housing inventory,” said Frank Nothaft, Chief Economist at CoreLogic. “Communities most affected by natural and financial catastrophe include those with already-high delinquency rates such as in Lake Charles, Louisiana, as reflected in the pre- and post-Hurricane Laura landfall rates.”
CoreLogic believes that climate change is significantly affecting the characteristics of hurricanes in the basins that impact the U.S., noting an increase in frequency and severity of hurricanes will result in the continuation of property losses and increased financial implications for the insurance industry.
While wind damages are covered by standard homeowners insurance policies, flood insurance is not consistent, and CoreLogic studies have shown that up to 70% of the damages from flood to homes is uninsured.
Metropolitan areas with the greatest level of homes at risk of losses include the New York metro, which has 890,430 homes with over $356 billion RCV at risk for storm surge and over 3.8 million homes with over $1.6 trillion RCV at risk for hurricane wind.
Following this is the Miami, Florida metro area that includes Miami, Ft. Lauderdale, and West Palm Beach, with more than 767,741 homes with over $156 billion RCV at risk for storm surge and over 2 million homes with over $422 billion RCV at risk for hurricane wind.
At a state level, Florida, Louisiana and New York have the greatest number of homes at risk of storm surge and hurricane winds.
“Resilience can be thought of as our ability to recover quickly after a shock, and because we cannot alter the frequency and severity of natural catastrophes, the continuity of our financial system relies upon the expectation of resilient communities,” said Tom Larsen, Principal, Insurance Solutions at CoreLogic. “The current focus is on anticipating what challenges to resilience will be confronting us in the future – a future where we expect more damaging events.”
