Natural Disasters of All Types on the Rise in 2017
Can you place this quote?
“Sold my soul? I will sell my soul to represent my district tomorrow and the next day. You have no idea what you’re talking about because you don’t know where Kingwood is, sir. Whether you say I sold out, you can call it whatever the hell you want to call it, I protect my neighborhood.”
Or how about this one?
“Remember what happened to the last person from the Chronicle that chronically criticized what we do? He’s no longer there.”
If you’re racking your brains for the source, conjuring up scenes from Goodfellas or The Departed, you’re wasting your time. They didn’t come from a classic crime drama or this year’s latest summer blockbuster that more-than-likely stars Dwayne ‘The Rock’ Johnson. No – these were stated in April during a very heated meeting of the Houston City Council concerning the topic of … flood mitigation?
Yes, flood mitigation. Such is the state of debate surrounding the deluge of natural disasters that have affected nearly every corner of the United States over the past few years, including Houston’s experience during Hurricane Harvey. And with city councils, state legislatures, and politicians across the country expressing concerns for how we, as a nation, deal with the increasing frequency and severity of all types of natural disasters, CoreLogic partnered with the Urban Institute to co-host an evening seminar and panel focused on natural hazard risk, mitigation strategies, and recovery efforts. The event was the 13th in the Sunset Seminar series, sponsored by CoreLogic and the Urban Institute and focused on public policy thought leadership relevant to the mortgage market.
CoreLogic Chief Actuary Howard Kunst kicked off the conversation by presenting excerpts from the CoreLogic 2017 Natural Hazard Risk Report, detailing the numerous weather and climate disaster events that occurred in 2017 including Hurricanes Harvey and Irma and the northern California Tubbs Fire, among others. Using CoreLogic flood risk data, he identified a whopping number of homes in the Houston metro that are in Special Flood Hazard Areas, pointing out that roughly three-quarters of a million homes are at high risk or greater during major flood events (highlighted in Figure One).
Unfortunately, the frequency of these disasters is increasing, with meteorologists already saying that 2018 will be another busy, above average hurricane season. But it’s not just about hurricanes – we have to be prepared for all types of major catastrophes – the recent California wildfire season has been disastrous for millions of families, the May 2017 hail event in Denver led to $1.4 billion in losses, and there’s a 72% chance of a magnitude 6.7 or greater earthquake striking the San Francisco Bay region in the next 25 years. To prepare, we need to properly assess risk in order to mitigate damage as much as possible, ensuring a quicker and less painful recovery process.
Other panelists were able to provide their unique perspectives on both preparing for and responding to these catastrophes. Fiona Greig, Director of Consumer Research at the JPMorgan Chase Institute, turned to the financial impacts of Hurricanes Harvey and Irma, as detailed in their recent report, Weathering the Storm. The report identified some interesting financial effects of the disasters, including that debt payments (mortgage, credit card, etc.) dropped by more than 15 percent in the week when hurricanes hit and remained lower than baseline for roughly three months after the disasters. This occurred as individuals forbore these payments to focus on recovery efforts, and may have contributed to the strong recovery of checking account balances after the storms, especially in Houston where balances were 10 percent higher than baseline 12 weeks after Hurricane Harvey.
Amanda Edwards spoke directly to the contentious debate surrounding risk mitigation and recovery. As an At-Large City Councilmember for the City of Houston, she was a participant in those heated debates that produced the quotes above, but also some new regulations – members ultimately voted to adopt heightened elevation standards for new construction in floodplains, requiring homes to be built at least two feet above the 500-year floodplain level. These new standards were quickly praised by outgoing National Flood Insurance Program (NFIP) Chief Executive Roy Wright who stated that “we will be looking to Houston to lead the nation in its resilience.”
Federal Affairs Director of the National Association of Mutual Insurance Companies, Andrew Huff, provided perspectives from the insurance community, referencing the BuildStrong Coalition which was formed to advocate for stronger building codes to decrease the amount of damage these storms can wreak, while also noting many positives in the current package of legislation that the House of Representatives has passed to reauthorize the NFIP, with several bills providing increased funding for pre-disaster mitigation. Sara Singhas, Associate Regulatory Counsel at the Mortgage Bankers Association, discussed some of the challenges faced in providing financial relief to individuals following a natural disaster, reiterating the importance of quick and accurate data to help with recovery – getting a precise estimate of losses is critical to providing assistance to the right locations quickly, a concern shared by CoreLogic.
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