The amount of damage that hurricanes inflict will continue to rise, along with their frequency and severity, according to speakers at a recent Hurricane Symposium in London held by The Insurance Leadership Institute of GE Insurance Solutions.
Roger Pielke, Jr., Ph.D, director, Center for Science and Technology Policy Research at the University of Colorado, said that the size of US hurricane losses will continue "to stagger and astound us" as a result of population growth and wealth accumulation in hurricane-prone coastal regions.
"As large as (Hurricane) Katrina was, it wasn't unprecedented," Dr Pielke said, indicating that storms of such magnitude have occurred in the past, but they inflicted less damage because the coastal regions were not as densely populated as they are today.
Ken Slack, senior underwriter, Global Property, GE Insurance Solutions, said the 2004-2005 hurricane seasons have reminded the insurance industry of the high frequency and severity potential of hurricanes. "We've had three of the top five storms in the last few months."
He emphasized that at least three of the four hurricanes to hit the Florida coastline in 2004 -- Charley, Frances and Ivan -- threatened far greater devastation if they had not veered at the last moment and hit less populated areas. Further, he continued, if Hurricane Rita would have equaled Hurricane Katrina in damages, the pressure on the insurance industry would have been immense.
Although the insurance industry relies heavily on catastrophe models to set its catastrophe premiums, Slack reminded the audience that models have their limits. For example, he said that each storm has its unique characteristics, which is not something that a model can account for.
He emphasized that he was not "belittling the use of the models in our business by any stretch. They've been a tremendous educational tool and a discipline we all embrace. But remember, they have limitations."
Despite the risk to coastal regions, Joseph Chamie, Ph.D., who is a demographer, indicated there's no end in sight to further population growth and that by 2008, the total coastal population is expected to increase by approximately 7 million.
"In addition to permanent residents, there is a large swell of vacationers, holiday and weekend, coming in the winter months," he said, noting that some counties increase from 10 to 100 fold in the winter season and one-quarter of the nation's seasonal homes are found in the coastal areas of Florida.