BOSTON, Nov. 16, 2005 – The potential impact of a major hurricane making landfall in the New York City metropolitan area was discussed by AIR Worldwide President and CEO Karen Clark at the National Catastrophe Insurance Program Summit, held in San Francisco on November 15 and 16. The conference was organized by insurance commissioners from California, Florida, Illinois, and New York to design a national program to more effectively spread the financial risk of natural and man-made catastrophes.
Ms. Clark presented the results of a study that analyzed the potential impact of a major hurricane on the New York City metropolitan area. The scenario is based on a category three storm, similar to the 1938 Great New England Hurricane, making landfall just to the east of New York City. AIR estimates that such a scenario, while not a worst case, would result in approximately $50 billion of insured losses with total economic losses exceeding $100 billion.
"The 1938 Great New England Hurricane was one of the most destructive storms ever to hit the northeast. Thousands of buildings were destroyed and some coastal communities disappeared entirely," said Ms. Clark. "A storm with similar characteristics would result in far more property damage today, since the total value of exposed properties in coastal areas of New York State alone has increased to over $1.9 trillion."
Approximately one-quarter of the $100 billion in total economic losses from such a scenario would be attributable to storm surge damage to property. The contour of New York's coastline and relatively shallow depth of its coastal waters make it extremely vulnerable to storm surge.
The high risk of coastal flooding would require more than three million people to be evacuated from low-lying coastal areas. However, many hours before landfall, major bridges would experience hurricane force winds and ferry service across Long Island Sound would likely be stopped. Disaster planners have estimated that it could take up to 18 hours to evacuate the first million people from the area.
"Hurricane Katrina was the costliest catastrophe to impact the United States to date, but unfortunately we need to be prepared for much worse," continued Ms. Clark. "AIR estimates that a loss equal to or greater than that of Hurricane Katrina has approximately a 5 percent annual probability for the United States. AIR's catastrophe models contain hundreds of potential scenarios with losses equal to or larger than that of Hurricane Katrina — some with insured losses in excess of $150 billion — which provides insurers with valuable information for managing their catastrophe risk."
About AIR Worldwide Corporation
AIR Worldwide Corporation (AIR) is a leading risk modeling company helping clients manage the financial impact of catastrophes and weather. Utilizing the latest science and technology, AIR models natural catastrophes in more than 40 countries and the risk from terrorism in the United States. Other areas of expertise include site-specific seismic engineering analysis, catastrophe bonds, and property replacement cost valuation. A member of the ISO family of companies, AIR was founded in 1987 to provide its insurance, reinsurance, corporate, and government clients a complete line of risk modeling software and consulting services that produce consistent and reliable results. Headquartered in Boston, AIR has additional offices in North America, Europe, and Asia. For more information, please visit www.air-worldwide.com.