Filed Under:Markets, Regulation/Legislation

Industry Reaction: Mayor Bloomberg’s $20B Plan to Shield NYC from Climate Change

New York City Mayor Michael Bloomberg announced an ambitious, multi-decade plan that would put $20 billion toward protecting the city against natural disasters caused by climate change.

The city currently has 535 million square feet of homes and businesses and 400,000 residents lining the coast, many of which are still reeling from the effects of Superstorm Sandy in 2012.

Research by catastrophe modeling firm AIR Worldwide shows the city—and its insurers—have a lot at risk. The insured value of properties in New York’s coastal areas total $2.9 trillion, making up almost two-thirds of the state’s total insured property exposure.

The Bloomberg plan calls for the installation of new walls and tidal barriers created by dunes and saltwater flora, as well as allocating $1.2 billion in loans and grants to help building owners retrofit property against new building codes for flood and storm surge resiliency.

The proposal even suggests a new “Seaport City” neighborhood built on landfill along the Lower East Side of Manhattan to protect the island from stormy seas. 

“After a catastrophe event, it’s not unusual for a city to ask what they can do to never go through those losses again,” says Julie Rochman, CEO of the Institute for Business and Home Safety (IBHS), which participated in the government’s task force on the plan in January 2013. “Feasibility, however, is a matter of political will.”

Rochman says she has seen cities take steps to mitigate against natural disasters but “nothing this ambitious in terms of taking a whole-footprint look at an entire urban area, especially on the East Coast.”

“The challenge in New York is in mitigating losses for current residential and property in the state,” adds Rochman.

Loretta Worters vice president of the Insurance Information Institute, says New York might look to Florida’s response to Hurricane Andrew in 1992 as an example of how a disaster served as a wake-up call to the government to implement a wide-scale urban risk management plan.

“Hurricane Andrew changed everything: from how homes are designed to how meteorologists track hurricanes and how the government manages emergencies. The changes over the past 20 years in Florida have been enormous,” she says.

Recommendations from a state-wide study in Florida included building-code adjustments and tougher inspections to prevent shoddy construction. 

Currently, no homes in New York City are considered “low risk” in hurricane conditions. New York is the sixth-highest state at risk of storm surge in the U.S., with about 270,458 potential properties exposed to as much as $135 million in damages from storms.

The report published by the New York City Special Initiative for Building and Resiliency predicts that by the middle of the century, 8 percent of New York’s coastline will experience regular tidal flooding; the city will have a four- to five-degree average temperature increase; sea levels  can rise up to two feet; and precipitation can spike from 5 percent to-10 percent.

Bloomberg’s plan would be brought to life with money allocated for capital improvements in New York as well as funds approved by the U.S. Congress towards post-Sandy relief.

Says Rochman, “The conversations we had with [the task force] were interesting because they were in a hurry to get the report out in time to help those who are still busy rebuilding from Sandy, but they do call for more analysis going forward, especially with wind-related design.”

The city has suffered terrible damage from hurricanes in the days when it was much less populated: the Great New England Hurricane of 1938, a Category 3 storm, caused 600 deaths and more than $400 million in damages along the Long Island, New York and Connecticut coastlines (Sandy was a post-tropical cyclone at landfall).

“An analysis by Karen Clark and Company estimates that [a similar storm] would have caused $35 billion in insurance damages had it occurred under present conditions,” says Worters. “So it may be an accurate statement by Bloomberg that it is likely a Sandy-sized storm in 2050 would be more destructive, the reason being that more people are building in high risk areas of the country.”

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