Don’t knock the knock-on effect of hurricanes

Climate experts expect the upcoming Atlantic storm season to be one of the busiest in recent years with 18 named storms, half of which will be hurricanes, and four of which will be considered major (Category 3 or higher).

While their immediate impacts on human lives and infrastructure grab most of the headlines, another aspect often goes unnoticed: the profound “knock-on” effect hurricanes have on the environment and the importance of insuring against these environmental disasters.

The impacts

One of the most visible and immediate consequences of hurricanes is coastal erosion. Storm surges and high winds associated with hurricanes can strip away vast stretches of coastline, eroding beaches, dunes and delicate coastal ecosystems. The loss of protective barriers and natural habitats leaves coastal communities vulnerable to future storms and amplifies the havoc they will wreak. The destruction of habitats such as coral reefs and mangrove forests has far-reaching ecological implications, affecting marine biodiversity and disrupting the delicate balance of coastal ecosystems.

Floodwaters can also carry pollutants from various sources, including industrial areas, agriculture, and residential zones, into rivers, lakes, and oceans. As a result, these bodies of water become contaminated, posing a grave threat to marine life. Chemical runoff and increased sedimentation can deplete oxygen levels in the water, causing fish kills and harming aquatic ecosystems. The introduction of pollutants can have long-lasting effects on marine organisms, affecting their reproductive cycles, immune systems and overall health.

Flooding from hurricanes also leads to saltwater intrusion, which can result in contaminating potable water aquifers in cities along the Atlantic and Pacific coasts. The outcomes are endless for the environmental impact caused by climate change and related factors, such as sea level rise and hurricanes, which could easily be an exponential climate change factor within the next few decades. The potential impact on site pollution policies will be significant, yet this risk is usually not factored into the underwriting of pollution liability policies.

The National Oceanic and Atmospheric Administration (NOAA) uses a Global Forecast System (GFS) weather model to forecast weather events, as well as predict ocean waves and levels caused by atmospheric events. There are many ways that the NOAA model could apply to environmental exposures, including:

• Existing sites undergoing cleanup are now under water.
• Flooding introduces contaminants into third-party properties.
• Flooding of UST systems.
• Saltwater intrusion for potable water.
• Flooding damages buildings and infrastructure.
• Soil, silt, and sedimentation from construction sites (an especially big risk in California due to new construction permits on projects over one acre in area).
• Trespass from adjacent sites, and more.

Mitigating risk

Given the increasing frequency and intensity of hurricanes, it’s crucial to recognize the importance of insuring against environmental disasters. The financial burden imposed by hurricane damage can be overwhelming, slowing recovery efforts and leaving affected regions vulnerable to further environmental degradation. By securing adequate insurance coverage, the costs associated with rebuilding infrastructure, restoring ecosystems, and assisting affected communities can be better managed, enabling a quicker and more effective response to environmental disasters.

Insuring for environmental disasters goes beyond providing financial support; it also promotes sustainable practices and incentivizes resilience measures. Insurance companies, in collaboration with policyholders, can encourage the implementation of resilient building practices, the protection of natural coastal barriers, and the adoption of environmentally friendly technologies. Such initiatives not only reduce the vulnerability of communities to hurricanes but also contribute to long-term environmental sustainability.

To determine your clients’ property and environmental insurance needs, you’ll not only have to assess and account for their risk exposure today but also plan for the future. Global warming, sea level rise, and increased hurricane frequency are legitimate concerns.

Hurricanes have a profound “knock-on effect” on the environment, causing coastal erosion, habitat destruction, water pollution and disruption of natural processes. As climate change continues to fuel the frequency and intensity of these storms, the need to insure against environmental disasters has never been more important. Adequate insurance coverage can help alleviate the financial burden, facilitate faster recovery, and promote sustainable practices that enhance community resilience and environmental stewardship. By recognizing and addressing these effects, we can mitigate their impact on the environment and work towards a more sustainable future.

Canaan Crouch is managing principal for Jencap’s Environmental Division. He has more than two decades of experience in the environmental consulting and insurance industries. He formerly held positions as a field geologist and project manager for an environmental consulting firm in Southern California and is a licensed California Professional Geologist. He specializes in environmental and professional liability exposures and was a founding partner in Landmark E&S Insurance Brokers, LLC, which rebranded to Jencap in 2021. Prior to founding Landmark E&S, he spent eight years working as a senior underwriter and an underwriting manager for two multinational insurance companies. Contact him at canaan.crouch@jencapgroup.com.

Related:

American home buyers are flocking to highly disaster-prone areas

Florida’s critical reinsurance market improves, but at a price

Rocky property CAT renewals stress insurer, reinsurer tug-of-war