How 100-Year and 200-Year Storm Predictions Affect Property Values, Insurance, Risk Mitigation


In a previous article, we discussed the impact of 100- and 200-year storm predictions on property. In this article we take a more in-depth look at how these predictions help with assessing building design and construction, property valuation, risks, insurance coverage, and emergency preparedness and response.

Building Design and Construction

Storm predictions influence building design and construction practices, especially in areas prone to severe weather. Building codes and regulations often incorporate requirements and standards to enhance the resilience of structures against extreme weather events. This can include specifications for foundation design, roofing materials, wind-resistant features, drainage systems, and flood-protection measures.

Property Valuation

Storm predictions can affect the valuation of properties in high-risk areas. Buyers, lenders, and appraisers take into account the potential risks associated with severe weather when assessing the value and investment potential of a property. Properties located in areas with a higher likelihood of storm damage may experience lower property values or reduced market demand.

Insurers are also scrutinizing property values more carefully to make sure coverage is aligned with valuations should there be a loss. They are requiring insureds to provide appraisals, real-time development costs, and/or a Marshall & Swift Report to back up property values. In the absence of this documentation to validate values, insurers are employing more stringent terms and conditions, such as issuing policies with scheduled limits and a margin clause.

Risk Assessment

The predictions of 100- and 200-year storms help property owners and insurers assess the potential risks and vulnerabilities associated with severe weather events. These predictions are based on historical data and statistical modeling to estimate the likelihood of such intense storms occurring within a specific time frame. However, historical models do not take into account the full range of events or climate change which has caused an increase in the frequency of severe losses including in non-Tier 1 areas. The increased frequency and severity of climate-related extreme weather events, such as hurricanes and wildfires, has caused property and casualty losses to surpass $600 billion in the past decade, according to the Insurance Information Institute.

As a result, insurers are updating their catastrophe models and using various methodologies today. According to an article by Milliman, insurers are improving models through blending. Combining multiple models can result in a more reliable risk estimate. Blending employs the use of multiple models to achieve the desired result, enabling insurers to consider multiple perspectives on risk generated by one or more models with varying strategies and strengths.

Property Insurance Coverage

Insurance companies use storm predictions to determine the level of risk associated with a property and calculate premiums accordingly. Properties located in high-risk areas are experiencing higher insurance costs or face challenges in obtaining enough coverage. In fact, the Property insurance market is hard and remains so moving forward. Second-quarter 2023 Property rates increased anywhere from 10% to 20% for non-challenged properties and 25% to 40% for properties in catastrophe-prone areas.

Emergency Preparedness and Response

Storm predictions also play a crucial role in emergency preparedness and response planning. Authorities, property owners, and communities can use these predictions to develop evacuation plans, establish emergency shelters, and allocate resources for disaster management. Having accurate predictions helps in implementing proactive measures to safeguard lives and property during severe weather events.

It is important for all stakeholders to stay informed about storm predictions, understand the associated risks, and take appropriate measures to mitigate potential damages. Working with insurance carriers, local authorities, and qualified professionals can help in assessing vulnerabilities, implementing necessary safeguards, and ensuring property resilience against severe weather events.

About Seneca Insurance Companies

Seneca Insurance Companies are known for having a broad appetite in writing property risks. We offer both admitted and non-admitted ISO-based policies, with catastrophe perils offered based on location and risk characteristics.

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