Looking Back to 1821, Insurers Foresee a $100-Billion Hurricane

Looking Back to 1821, Insurers Foresee a $100-Billion Hurricane (crappy article by NYT)

It may be extremely quiet here at what’s typically the peak of the Atlantic hurricane season, but that’s no reason to relax. All it takes is one great storm.

For that reason, Swiss Re, the giant reinsurance company, spends a lot of time and money going back in time trying to gauge the scope of losses it may have to cover in years to come. Its experts work with officials in places like New York City to try to limit exposure to hazards that, while rare, are ultimately inevitable.

That’s why one of the company’s atmospheric and ocean scientists, Megan E. Linkin (the photo is from when she was interviewed for The Times in 2010), just re-ran one of the region’s most awesome disasters — the great Norfolk and Long Island Hurricane of 1821, but with today’s heavily developed metropolitan region in harm’s way. The result is, needless to say, deeply sobering, showing that the losses from Hurricane Sandy were, as many experts have warned, nowhere near a worst case.

The study’s bottom line?

If the 1821 Hurricane were to happen today, it would cause 50% more damage than Sandy and potentially cause more than $100 billion in property losses stemming from storm surge and wind damage.

Here’s a question I put to Linkin:

Given the “we will not retreat” politics that still seems to dominate storm politics in coastal cities, do you foresee a real-world way to soften shorelines and create more resilient urban planning given what’s laid out in this analysis — and the inevitability of decades of rising seas ahead in a warming climate?

Here’s her answer:

Increasing coastal community resilience is critical to confront climate change and its negative implications. Coastal communities are a significant aspect of the United States economy, currently contributing $6.6 trillion to the total U.S. GDP, and providing 51 million jobs.

Some of the resiliency measures looked at by New York, which other coastal communities can consider, include floodwalls, levee systems, relocation of critical building infrastructure such as electrical equipment and wetland replenishment.

The insurance industry has an important role in helping all communities, including those along the coasts, understand and prepare for the risks they face.

A good example of this is Swiss Re’s work with the City of New York, during the Bloomberg administration. Swiss Re used climate change scenarios by incorporating rising sea levels in our underwriting tools so that the city could translate feet of sea level rise into dollars of potential economic losses. The benefit of this analysis for the City was twofold; first, the analysis provided officials with an independent market-based estimate of the city’s hurricane risk and second, by incorporating resiliency measures directly into Swiss Re’s underwriting tools, city decision makers received a cost-benefit and could see which resiliency measures made sense financially, and which they considered too expensive.

The big one: The East Coast’s USD 100 billion hurricane event (Full paper - warning PDF)