Endangered Coastline: Northeast Prepares for Latest Storms

Bill Sinn, strategic industry director in the insurance practice for Pitney Bowes Business Insight, points out Florida and the Gulf states have had more than their share of damaging storms throughout history, but people seem to forget that the eastern seaboard has also been prone to damaging hurricanes.

"You have to go back to 1991 and hurricane Bob, which was the last storm to threaten such a broad swath of the U.S. coastline," says Sinn. "Nineteen years may have passed, but many forecasters think a storm like hurricane Bob is long overdue for the northeastern part of the country."

(Sinn's views on the insurance industry's efforts in risk modeling can be heard in a podcast found on the Tech Decisions Web site.)

For insurers today, the major issue is the dramatic change in the population in the coastal regions of the United States. "Over the past 50 years, Americans have had a total love affair with the coast," says Sinn. "We've witnessed unprecedented population growth in practically every coastal county in the country."

Sinn cited U.S. Census Bureau figures that estimate nearly half of the U.S. population lives within a 50-mile radius of the coast. "As population grows it translates into a huge increase in both the number and dollar value of insured properties in those counties," he says. "Never have so many high value American homes been built so close to vulnerable shorelines."

Sinn points out that the endangered coastline includes some of America's priciest real estate in New York City and Long Island. "If you look at the top two states with the highest cumulative value of insured coastal properties--information I took from the Insurance Information Institute--Florida is ranked No. 1 with $2.45 trillion and New York is ranked Number 2 with $2.37 trillion," says Sinn.

There is a lot of risk, but Sinn believes insurers are much better prepared to monitor, assess, and even respond to those hurricane exposures. He credits the lessons learned from Hurricane Katrina as the reason for the industry's improved stance. "[Katrina] changed the way insurance carriers analyzed risks from the storm and it changed the way they responded to the storm," he says.

Despite the economic downturn and the shifts that have been taking place in the financial markets, Sinn believes most insurers are well capitalized and financially prepared for a catastrophic event. "With the big improvements in things like weather forecasting, risk analysis, and even in some of the cat modeling that's been happening over the last five to 10 years, insurers are in much better position to identify, manage, and mitigate the risk exposure of these storms," says Sinn.