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Effective disaster risk management requires a partnership of community, state and federal leaders, private-sector businesses and the insurance industry, says Holly Bamford, Ph.D., National Oceanic and Atmospheric Administration's acting assistant secretary for conservation and management. For example, Since Sandy, NOAA has been working with a coalition on storm surge tools for New York City and other areas.
On Oct. 29, 2012, post-tropical cyclone Sandy made landfall just northeast of Atlantic City, New Jersey. Because of the tidal conditions during landfall and its tremendous size, Sandy drove a catastrophic storm surge into the New Jersey and New York coastlines.
In New York City alone, the storm caused 43 deaths and roughly $19 billion in overall damages, while bringing much of the city's transportation and telecommunications services to a halt. In a 2013 post-Sandy New York City report, officials called Sandy a “cruel reminder of how destructive coastal storms can be in our dense urban environment — storms that, with climate change, are expected to increase in intensity.”
Since Sandy, New York City has taken a leadership role in attempting to mitigate threats of storm surge in a high-risk area, both through infrastructure changes and risk securitization. The city and partners are using data, tools, and services from the National Oceanic and Atmospheric Administration to advance New York City's resilience. As a result of a partnership, in which NOAA provides critical information to planners and managers, New York City hopes to be better prepared for the next hurricane — in terms of protection, planning for recovery, forecasting damages, and minimizing loss of life and property.
In total, Sandy caused 72 deaths, cost $50 billion in total damages, and $25 billion in insured losses across 15 states. We've seen many other extreme events across the U.S., including devastating storm surges, drought, tornadoes, and flooding. Since 1980, the U.S. has experienced 144 extreme events, in which overall damages reached or exceeded $1 billion each, resulting in more than $1 trillion in combined damages. In 2005, Hurricane Katrina caused 1,200 deaths and $108 billion in damage, from which Louisiana and Mississippi are still recovering. In 2008, Hurricane Ike struck Texas, causing $29.5 billion in damages.
The number and severity of effects of extreme weather, climate, and water events in the U.S. has risen since 1980, and both are projected to continue rising this century. As Mayor Michael Bloomberg said in the introduction of New York City's long-term sustainability plan: “While Sandy caused about $19 billion in losses for our city, rising sea levels and ocean temperatures mean that by the 2050s, a storm like Sandy could cause an estimated $90 billion in losses (in current dollars) — almost five times as much.”
One important issue facing New York City after Sandy was obtaining insurance for its subway system, administered by the Metropolitan Transportation Authority. Faced with unaffordable premiums to insure the entire subway system, MTA developed a new strategy to affordably insure a flood-prone segment of its rail system by using a catastrophe bond.
To implement this strategy, the MTA worked with the global catastrophe modeling company Risk Management Solutions to determine the probability of future flooding, and then developed a catastrophe bond that pays out, or “triggers,” based on local water level data provided by NOAA and the U.S. Geological Survey. In this case, when the water level during a storm measures 8.5 feet above the reference water level at the New York Battery NOAA Water Level Station, the bond is triggered, and MTA is able to take possession of the bond proceeds and use them to repair and rebuild the facility.
Providing accurate, long-term, and reliable data is key for effective risk securitization in a changing environment, and this method also provides New York City with surge hazard level — up to 8.5 feet above the reference water level — for which the city must plan protection. Through this approach, the city is able to provide incentive to its partners to mitigate moderate flooding risks, as the catastrophe bond only pays out in an extreme circumstance.
The water level information being used by New York City is measured by NOAA's National Water Level Observation Network and is only one example of the coastal and ocean data available for public use to inform storm surge risk mitigation. This type of information is also incorporated into NOAA tools, products, and services analyzing long-term issues like sea level rise. These surge and sea level rise tools are available on NOAA's Digital Coast website, and they can be used to plan for and mitigate risk.
Following Sandy, NOAA partnered with the Federal Emergency Management Agency, the U.S. Army Corps of Engineers, and the U.S. Global Change Research Program to create a Sea Level Rise Tool specifically for Sandy recovery, looking a step beyond storm surge risk alone. Steps are being taken to expand this New York/New Jersey region pilot into other areas. Coastal states and businesses expecting further losses and increased exposure due to catastrophic events and rising seas are encouraged to work with NOAA to incorporate these products into their planning to help mitigate both current and future risk to coastal communities and jobs.
To help communities like New York City be better prepared for the next hurricane that makes landfall, NOAA is improving storm surge warning capabilities and products. Recent upgrades to forecast models have focused on predicting the total water level of coastal floods, by including the effects of surge and tides and combining them with near-shore wave predictions. NOAA is also improving communication and dissemination of surge forecasts through a new experimental map depicting potential surge heights for communities. As a hurricane approaches shore, NOAA's Hurricane Center will display this map on its website to enable communities that are in the potential path of the hurricane to prepare for the effects and evacuations.
These tools were developed for community decision-makers and emergency and natural resource managers. However, when combined with the insurance industry's existing risk management and underwriting tools, they provide insurance agents, brokers, and underwriters risk insights that are not available elsewhere.
The improvements and upgrades described highlight NOAA's core mission, to bring together the best people, science, and technology to save lives and to help communities both understand risk and to develop the necessary adaptation and resilience strategies.
Effective risk management requires a broad coalition of vested and knowledgeable federal, state, non-governmental organizations, and industry partners. It is critical that these sectors continue to engage and build partnerships to better manage risk moving forward. The time is now to forge sustainable partnerships.
Holly Bamford, Ph.D., is NOAA's acting assistant secretary for conservation and management. She can be reached at Holly.Bamford@ noaa.gov and 202-482-6255.
A Deepwater Horizon-related coverage dispute highlights the need for corporations to square their commercial contracts with their insurance policies. Christopher C. Loeber and Kelly A. Lloyd with the law firm Lowenstein Sandler L.L.P. discuss the interplay between indemnification agreements and “additional insured” provisions and the importance of retaining insurance coverage counsel to help navigate some very significant pitfalls.