Lessons from Past Storms and Economic Changes Suggest Rebuilding Efforts After Florence Will Be Arduous
As the saying goes – location is everything. Following the two largest U.S. hurricanes this year, Hurricane Florence in the Carolinas and Hurricane Michael in Florida, communities are rebuilding.
Both hurricanes caused devastation throughout their respective regions and yet data suggests Florence recovery will be especially formidable, dictated by the area’s specific economic and environmental conditions. As rebuilding efforts post-Florence and Michael proceed, previous hurricanes show carriers that effectively incorporating data-driven solutions into their processes will promote more proactive underwriting and claims resolution.
Uninsured Flood Risks
Past storms can shed light on future hurricane recovery. A year after Harvey first made landfall in the greater Houston area, the city’s path to recovery is still far from over. The hurricane was catastrophic, ranking as one of the costliest storms on record at $125 billion, but the hefty price tag is not the only reason for longer rebuilding efforts. The low level of flood insurance coverage in the city is another key factor.
Unlike other hurricane-prone regions in the continental United States, Houston and North Carolina were particularly underinsured in the face of such storms. In Houston, approximately 80 percent of impacted homes did not have flood insurance when Harvey hit, contributing to slower rebuilding efforts for homeowners.
Similarly, in North Carolina, just 35 percent of at-risk properties had flood insurance in place compared to 65 percent of at-risk properties in South Carolina. Fundamentally, the benefit of insurance is twofold. Properties get the money they need to begin reconstruction quickly as well as the resources to make their properties whole again.
Early reports suggest insured losses from Hurricane Michael, which were primarily wind-related versus flood-related, won’t be disruptive for carriers as loss estimates climb. The region is well-insured partly because carriers and insureds expect to see some amount of catastrophe activity annually. This leads to a level of preparedness that is ultimately beneficial.
Meanwhile, North Carolina tells a different story. Given the low level of flood insurance, there is a potential that properties without comprehensive coverage will be repaired to habitability but likely will not be made whole.
Record Rainfalls Distort Expected Losses
Just before making landfall, Florence was downgraded to a Category 1 hurricane, perhaps causing a false sense of security among residents of the Carolinas. However, like a number of recent hurricanes, the category of a hurricane does not always tell a comprehensive story of expected damage. While a lower category hurricane accurately reflects wind speeds subsiding, it does not account for the slow-moving rain storm and subsequent flooding.
A week into the hurricane, Florence dropped 86 inches of rain in Wilmington, N.C., surpassing the city’s records for highest rainfall during a given year. The record rainfall and ensuing floods led to more damage than the strength of the storm itself. This resulted in underprepared residents who may have taken additional measures if they had understood true hazard — flooding rather than wind or storm surge.
Hurricane Michael was by no means a mild storm. Over the course of 24 hours, Michael was upgraded from a Category 3 to a strong Category 4. However, the storm moved at a quicker pace, subjecting the panhandle to a lower volume of rain than Florence. While damage was extensive and communities were affected, a modest population density in the area means that subsequent costs will be more manageable for carriers.
Harvey and Florence demonstrated back-to-back that hurricane preparation should take into account more than wind speeds and storm surge. Flooding causes substantial damage and travels much further inland than a typical storm surge.
Loosened Building Codes and Recovery
Enforcement of building codes is crucial to the level of risk a property maintains. In recent years, North Carolina made a few key changes to its construction regulations, for example, extending the amount of time between updates to building codes and waiving a requirement to anchor storm shutters permanently. The Insurance Institute for Business and Home Safety pointed out that North Carolina’s building code would consequently remain two cycles behind national building code recommendations for hurricane-prone areas. These changes set Florence-impacted areas up for increased potential damage to properties.
The same could be said for the Florida Panhandle, where building codes and construction regulations are more relaxed than other parts of the state. Nonetheless, Florida’s building codes are still some of the strictest in the United States.
With more damage and less insurance than expected, properties can be built to be livable, but perhaps never made whole.
Communities in the Panhandle require newly constructed homes to withstand wind speeds up to 130 miles per hour. This suggests that while the Panhandle was less prepared than an area like South Florida, regulations in the area are far from loose.
The composite effect of low levels of insurance, underanticipated losses, and looser building codes can lead to a homeowner without the resources to repair their home to pre-catastrophe standards in a timely manner. With more damage and less insurance than expected, properties can be built to be livable, but perhaps never made whole. Unfortunately, this leaves those properties even more vulnerable to the next storm.
As the estimated cost of Florence rises to anywhere between $38 and $50 billion, carriers must consider the right technologies that will allow them to monitor maintenance progress and know which properties are prepared for the next storm and which are not. Given the influx of larger storms with multiple perils in recent years, it’s important that carriers equip themselves with timely data about the evolving built environment. In doing so, they can improve pre-catastrophe preparedness and post-catastrophe response in order to better serve their customers when they need it most.
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