More Federal Flood Insurance? The Wrong Response to Hurricane Sandy

It’s been almost fifty years since the first billion-dollar hurricane hit American shores. In 1965, “Billion Dollar Betsy” meandered through the Bahamas, changing course like a drunkard, devastating Key Largo, and gathering strength as it headed for landfall at Grand Isle, LA. When was over, 77 people were dead, and costs mounted to $1.42 billion – or $8.5 billion in equivalent current dollars.

Of course, insurance companies reacted to the staggering losses by carving out flood damage from their policies. And Congress responded by creating the National Flood Insurance Program (NFIP) to fill the gap they left behind. For the last 43 years, the Federal government has been the primary provider of flood insurance in the country. And in hindsight, Betsy's losses look like small change, dwarfed by modern monsters like Katrina ($108 billion in losses), Ike ($38 billion) and Wilma ($29 billion).

We’ve written twice about the NFIP: first, about the huge losses that are mounting as taxpayer-subsidized insurance lures ever more people into harm’s way; and second, about states like North Carolina, which have embraced plans to suppress sea-level science, leaving the damage from unchecked coastal development to be paid for by the rest of the country.

When we wrote those posts, we had never heard of Hurricane Sandy. That now seems like a long time ago. Since then, we’ve replaced two roofs and repaired two more at Good Hand Farm; endured two weeks without water, light or heat; and cut up hundreds of tree branches lying on homes and power lines. Few of us imagined that northern cities like New York would be so vulnerable to a “tropical” storm.

Tuckerton, NJ, awash during Sandy storm surge

To be clear, we’ve repeatedly warned our readers – and our personal friends – about the risks of sea-level rise to New York and the Eastern Seaboard. We’ve highlighted the OECD’s projected $2.1 TRILLION cost to New York City, and the surprisingly high toll ahead for the Tidewater region.

But, to be honest, we never imagined it would happen so soon.

When we bemoaned the $19 billion dollars that the NFIP has had to borrow from taxpayers to honor its flood claims, we never imagined that in the span of a few weeks, the number would be hovering at $25 billion. To be fair, no firm numbers are in yet. But the cost of Hurricane Sandy has been estimated at $52.4 billion, and NFIP’s insured losses have been ball-parked at $7 billion. It could be better; or it could be much worse.

Our fiscal-hawk friends will be pounding the table at this point, and who can blame them? $25 billion of taxpayer money has been poured into the sea, mainly to rebuild vacation homes and seaside condos largely owned by wealthier Americans.

But our concern is much more basic: American policy is actively luring our citizens into harm’s way. Many of us have friends who are investing their retirement savings in attractive coastal properties, financed by mortgages that rely on Federal flood insurance. There should be no doubt as to whether these policies will still be available in ten or twenty years. They won’t.

They won’t because sea levels are rising, and coastal storms are gaining intensity – two well-documented consequences of global climate change. Most coastal states are planning on sea-level rise of 1-2 meters this century. Add a meter to Hurricane Sandy’s storm surge, and you have almost inconceivable damage and loss of life. Two meters? It’s beyond counting.

Not just projections: The sea is rising

No Federal program has the money to make good on such losses. For the sake of all Americans living on or near coastal flood zones – and particularly for those considering a move – we simply must remove the enticement to wander into harm’s way. When you’re stuck in a hole – they say – the first rule is this: Stop digging.

So what should we do? Here’s a plan that might serve as a starting point for people smarter than me:

1. Over the next decade, NFIP premiums should gradually increase to reflect the full cost of coastal and flood zone risk – to levels that would be supported by private insurers.
2. Over a very short time, the NFIP should impose a moratorium on policies for new development in zones that will be flooded by a 5-foot rise in global sea levels. 
3. No new policies should be issued for development on barrier islands.
4. Vacation homes should be phased out of the NFIP program as soon as is practicable.
5. After major losses, NFIP should provide incentives for claimants to relocate out of floodplains, rather than rebuild in harm’s way.
6. Repetitive-loss properties should be carefully examined for immediate exclusion from the program.

If there’s any silver lining to the horrors of Hurricane Sandy, it’s that ordinary people have begun to accept that the climate has changed. Perhaps our leaders will now begin to realize that our coastal policies must change with it.

Thanks for reading, and may God bless you.

J. Elwood

Follow @John_Elwood

An Apology to the Mayor

Two days ago, I asked this question: Was Hurricane Sandy an isolated weather event or an indicator of climate change? I was surprised to report that New Yorkers from all walks of life had reached the conclusion that the climate is fundamentally changing. This included scientists (as usual), insurance companies, waitresses, business owners – and, yes, Mayor Michael Bloomberg.

I acknowledged the Mayor for stating that the weather events are “much more severe than before.” But the compliment was definitely back-handed. The Mayor’s apparent agnosticism about the causes of our new severe weather drew this comment from me: “Trust the savvy mayor to call it straight while ducking the politically-sensitive issue of climate change!”

Bloomberg tours wreckage at Breezy Point, Queens, NY

So you can imagine my surprise in finding that the Mayor Thursday endorsed President Obama for one reason above all: that he’s demonstrated leadership in fighting the threat of global climate change, a threat that the Mayor blames for much of the hurricane devastation in New York City. By contrast, the Mayor said that Governor Romney has abandoned the beliefs he once professed to hold regarding our “temporary stewardship of this Earth.”

To be clear, the notable thing to us is not that the Mayor endorsed one candidate or another, but that in doing so, he clearly outlined the very present, practical threat of climate change to the people of New York and their children. Caution to the wind, the Mayor said it straight: “The climate is changing.”

Here are a few excerpts from the Mayor’s announcement of support for the President:

• The floods and fires that swept through our city left a path of destruction that will require years of recovery and rebuilding work…. In just 14 months, two hurricanes have forced us to evacuate neighborhoods – something our city government had never done before. If this is a trend, it is simply not sustainable.
• Our climate is changing. And while the increase in extreme weather we have experienced in New York City and around the world may or may not be the result of it, the risk that it might be – given this week's devastation – should compel all elected leaders to take immediate action.
• Here in New York, our comprehensive sustainability plan – PlaNYC – has helped allow us to cut our carbon footprint by 16 percent in just five years.... Local governments are taking action where national governments are not.
• But we can't do it alone. We need leadership from the White House – and over the past four years, President Barack Obama has taken major steps to reduce our carbon consumption, including setting higher fuel-efficiency standards for cars and trucks. His administration also has adopted tighter controls on mercury emissions, which will help to close the dirtiest coal power plants … which are estimated to kill 13,000 Americans a year.
• Mitt Romney, too, has a history of tackling climate change. As governor of Massachusetts, he signed on to a regional cap-and-trade plan designed to reduce carbon emissions 10 percent below 1990 levels. "The benefits (of that plan) will be long-lasting and enormous – benefits to our health, our economy, our quality of life, our very landscape. These are actions we can and must take now, if we are to have `no regrets' when we transfer our temporary stewardship of this Earth to the next generation," he wrote at the time. He couldn't have been more right. But since then, he has reversed course ….

So Mr. Mayor, I owe you an apology. You did not – as I said – duck the issue of climate change. You called it straight based on what you’re seeing in New York. And whatever your politics, you explained your decision clearly based on the issues most important to you. 

Thank you – and perhaps you alone – for responsibly dealing with the threat of climate change in this political season soaked with unlimited oil money.

For readers of the Clothesline Report, perhaps we’ve believed that only Miami and New Orleans are in the climate cross hairs. Now we know better. New York is facing some of the greatest losses to sea level rise in the country. This great city has $2.1 TRILLION of assets exposed to projected sea level rise, the third most exposed city in the world. (Miami, unfortunately, is number one.) The entire Eastern seaboard is highly vulnerable, from the Outer Banks, Hampton Roads, Washington DC, Philadelphia’s fresh water supply, and Connecticut’s vulnerable infrastructure.

What the Mayor sees today for New York, mayors across the country will soon be seeing. From cities awash on the Eastern Seaboard and the Gulf Coast, from river towns flooding like clockwork in spring, from Southern cities devastated by record-setting tornadoes, from parched Texas and Midwest cities gasping for water, or Rocky Mountain cities scorched by wildfires, mayors will surely begin to make the connections between a climate on steroids and human fossil fuel emissions. It’s time to talk straight, and Mayor Bloomberg is leading the way.

Thank you Mr. Mayor for speaking out.

Thanks to you all for reading, and may God bless you.

J. Elwood

Follow @John_Elwood

Hurricane Sandy: Isolated Weather, or Climate Change?

“It didn’t used to be this way.”

Around New York, it seems everyone’s saying it. Something basic has changed, and it’s not good. Drivers searching in vain for an open gas station say it. Hotel guests shivering in blacked-out guestrooms say it. So do grandmothers camping out in their children’s apartments for a hot shower and a warm place to sleep. And so do professionals locked out of their darkened New York City offices.

It seems Hurricane Sandy has convinced the average New Yorker that something weird is going on. With the last few years’ tornadoes, freak snow storms, spring droughts and three consecutive years of once-in-a-lifetime flooding events, most everyone’s begun to notice. Something’s changed around here.

But at the same time, I hear cautions about jumping to conclusions. A leading Christian conservationist advised me last evening: “Take due care not to confuse isolated weather events, however appalling, with wider trends” – like climate change.

Good advice, of course. But how then should we think about Hurricane Sandy, the “Frankenstorm?”  Is it an isolated event, or another milestone of an unfolding trend – a harbinger of a dark, permanent, carbon-fueled reality?

As I look around this city, most people agree that these extreme events are here to stay – whatever they know about global climate change.  The hotel waitress said it at breakfast: “I’ve been working here for fifteen years. We’ve never seen anything like these last four or five. My home is dark and cold. And with no gas now, how are we going to get home?”

The hotel manager agreed: “We might as well accept it,” he said, with his children – more storm refugees – at his side. “This is the way things are now.”

Flooded cars in the Financial District

The hotel’s owner was sure he knew about local weather trends five years ago when he made his investment. But “freak weather events” have struck every year since – floods and severe storms driving away guests from the hotel and businesses from the neighborhood.

His partners are sympathetic, but they have their own problems: homes damaged by fallen trees, neighborhoods swamped by unprecedented storm surges, power outages leaving them in the dark, and shut-down transit systems preventing them from getting back to work.

The city’s mayor also sees the new climate trends: “What is clear is that the storms that we’ve experienced in the last year or so around this country and around the world are much more severe than before,” said Mayor Bloomberg. “Whether that’s global warming or what, I don’t know. But we’ll have to address those issues.” (Trust the savvy mayor to call it straight while ducking the politically-sensitive issue of climate change!)

The governor is less cautious: “Climate change is reality,” said Governor Cuomo. “Extreme weather is a reality. It is a reality that we are vulnerable…. There’s only so long you can say, ‘well this is a once-in-a-lifetime and it will never happen again. I believe it’s going to happen again. I pray that it’s not; I believe that it is.”

“We have a 100-year flood every two years now,” continued Cuomo. “We have a new reality when it comes to these weather patterns. We have an old infrastructure and we have old systems, and that is not a good combination.”

So far, only the Fox News anchor dismisses the apparent new popular consensus. On the TV screen above the hotel bar last night, Bill O’Reilly had dug up a meteorologist armed with stories of mega storms from about a century ago, when greenhouse gas concentrations were much lower.  The message was clear: Storms happen all the time; don’t believe the alarmists who tell you that it’s a global warming milestone.

Storm surge hit the Jersey Shore with a vengeance

So who’s to be believed? Are these changes here to stay, evidence of human-caused climate change? Or are we dealing with isolated weather events?

Well, there are people whose sole business is to assess risk associated with future hazards. For the insurance industry, our question is no theoretical exercise. In their business, it’s a matter of life and death. If storms like Sandy are “isolated events,” some smart players will grab market share while their more timid competitors reduce their exposure. If it’s “the new reality,” then that same strategy will land them in bankruptcy court.

So it’s interesting to note that insurance giant Munich Re issued a report two weeks before Hurricane Sandy hit, stating that weather-related loss events have nearly quintupled in North America over the last 30 years – even after adjusting for population growth, development and inflation.

“Anthropogenic climate change is believed to contribute to this trend,” said Munich Re in a press release, “though it influences various perils in different ways. Climate change particularly affects formation of heat-waves, droughts, intense precipitation events, and in the long run most probably also tropical cyclone intensity.”

Munich Re thinks North American weather has been hit hard in these last 30 years, and climate change is a notable part of the problem -- the only one they mention. But maybe the trends are different elsewhere on earth?  Sadly, no. Over the last 30 years in Asia, severe weather events are up by a factor of 4.0. In Africa, 2.5. In Europe, 2.0. And even South America has seen a 50% increase in severe weather during the same period.

Subway to nowhere: Public transit under water

The whole world is getting stormier, but North America is getting the worst of it.

"In all likelihood, we have to regard this finding as an initial climate-change footprint in our US loss data from the last four decades,” said Peter Höppe, Head of Munich Re’s Geo Risks Research unit. “Previously, there had not been such a strong chain of evidence. If the first effects of climate change are already perceptible, all alerts and measures against it have become even more pressing.”

And Munich Re Board Member Peter Röder had a special warning for Americans: “We should prepare for the weather risk changes that lie ahead, and nowhere more so than in North America.”

So what’s the verdict? Is climate change causing big storms like Hurricane Sandy?  Scientific American Senior Editor Mark Fischetti offers a blunt assessment:  “No doubt here: It is.”

“If you don’t believe scientists,” writes Fischetti, “then believe insurance giant Munich Re.”

And if you don’t believe either scientists or insurers, then wait till you get your next property insurance renewal – if it’s renewed at all.

Thanks for reading, and may God bless you.

J. Elwood

Follow @John_Elwood