The preparedness of U.S. businesses is still wanting despite lessons learned from Hurricane Sandy and the high hurricane activity, devastation and losses so far this Atlantic hurricane season, suggests Allianz Global Corporate & Specialty (AGCS).
A pickup drives through flood water in the aftermath of Hurricane Harvey Friday, Sept. 1, 2017, on a rural rald near Galveston, Texas. (AP Photo/Charlie Riedel)
“For many companies it takes time – in some cases years – to appropriate funding and actually make the much-needed changes,” the report notes. “However, a commitment to active prevention minimizes risk and protects the bottom line,” it emphasizes.
AGCS released the report to mark the fifth anniversary of Hurricane Sandy, which made landfall as a post-tropical cyclone along the New Jersey coast on Oct. 29, 2012, and produced economic losses totalling more than US$70 billion.
Superstorm Sandy – which changed from a wind event to a high-water event – had ranked as the second costliest hurricane in U.S. history – between Katrina (US$160 billion) and Andrew (US$48 billion).
That was until Hurricane Harvey this summer. The toll has certainly not been finalized, but estimated losses ranging from US$60 billion to US$108 billion have been reported.
So far during the 2017 Atlantic hurricane season, the report notes, there have been three Category 4 hurricanes that made U.S. landfall in less than a month, resulting in billions of dollars in damage.
“In the five years since Hurricane Sandy, the costs of U.S. weather disasters is increasing,” the report states. AGCS figures indicate storms around the world are the fifth top cause of loss for businesses.
Based on Allianz’s own experience, it reports the severity of losses from weather events, including windstorms, is already increasing. Including windstorms, the average amount paid by insurers for extreme weather events from 1980 through 1989 amounted to US$15 billion annually.
“Between 2010 and 2013, this rose to an average of US$70 billion a year,” the report points out.
“It is a certainty that as the value of property in coastal areas increases, the financial impact of storm events becomes more substantial,” the report notes unequivocally.
“Flood maps in effect during Sandy were mapped outside of the 100- or 500-year flood plains and did not consider the impact of future sea level rise,” it explains.
Action is required in light of the “new normal” of weather events at play. “The ability of [the natural] coastline to absorb storm surge has really been reduced,” Andrew Higgins, technical manager for Allianz Risk Consulting, cautions in the report.
“Hurricane Maria’s post-loss amplifying effects of business interruption include severely affected power supplies, outages that will last months, and limited fuel for electricity generators,” Higgins goes on to say.
Pointing out that the global average sea level has risen by some eight to nine inches since 1880, the situation “is likely to result in an increase in the severity of storm surge along the coastlines of the U.S.,” Thomas Varney, North America manager for Allianz Risk Consulting, notes in the report. “The losses from Sandy and the 2017 hurricane season illustrate this point,” Varney continues.
“The 2017 Atlantic hurricane season is set apart by the number of intense storms that formed, and how many of those powerful systems made landfall,” states the report.
“Since hurricanes thrive on warm ocean water, it’s likely that rising ocean temperatures
connected to climate change will provide more opportunities for storms to rapidly intensify like this year’s hurricanes,” it notes.
With climate change, sea rise and populations and industry booming on the U.S. coasts, “today, more than ever before, businesses need to prepare for the ‘new normal’ of weather events,” the report recommends.
“As property values increase, so does risk. And as the atmosphere warms, scientists expect destructive weather itself to become more common,” it adds.
“Harvey is a prime example of how these two factors (surge and terrestrial flooding) work together to create the perfect storm, producing catastrophic coastal flooding when they occur at once,” the report quotes Amir AghaKouchak, an associate professor of hydrology and remote sensing at the University of California at Irvine, as saying.
“And now we need to pay more attention to the way these factors work together when we’re estimating flood risks for coastal regions — before disaster actually strikes,” AghaKouchak emphasizes.