The Amplitude of Variability

6 thoughts on “The Amplitude of Variability”

  1. The only people who should be building in these high-risk areas are people who can afford to lose a house. Now, hurricanes in Florida will always be a risk, and there’s a reason people along the coastline used to live in shacks, and still do in most of the world. The forest fire risk in the West is the result of many governmental blunders, including mismanagement of forestry on Federal lands and diversion of water resources to the desert cities of the Southwest. But all the development and risk is definitely abetted by subsidizing the risk management and also by requiring the broadest possible distribution of risk. Rate the coastal zones, the rockslide zones, the flood and wildfire zones, etc., according to actual risk and watch urban sprawl and environmental degradation slowly recede!

  2. “No insurance… no mortgage. No mortgage… no sale. No real estate value… no tax revenue.”

    That sounds like a nice way to keep the good credit debt suckers from gentrifying an area. Where I live one could make an argument for pulling insurance on account of fire danger. For people who don’t have the resources to compete with those who can invoke finances such coverage holes could by an opportunity. Though with the understandable down sides. Or, would such areas drop in price, but still be owned by folks who can put cash on the barrel head?

    I could see these insurance gaps growing and being the seedling beds of the deindustrial future, even as the ever shrinking insured areas maintain the show of industrial civilization for generations to come.

  3. A little history. Prior to Hurricane Sandy, environmentalists and conservatives got together and passed a reform to federal flood insurance, which is effectively bankrupt, to push it toward actual market rates. Why should poorer people subsidize beachfront mansions?

    Just as the reform was expected to take place, Superstorm Sandy hit, the worst case scenario for New York City. The far more likely scenario is for a Northeastern hurricane to hit Long Island, with all those beachfront mansion in the Hamptons. But Hurricane Sandy took place late in the year, somehow merged with a nor’easter, and went backwards, shoving the ocean into New York harbor.

    As a result, a large share of the people affected were working class or even poor, in places such as the Rockaways. Cops, firefighters, dishwashers, busboys. So the reform was watered down.

    The only way out, as I can see it, is no flood insurance for new buildings in flood planes. A limit of $240,000, or six times median household income, on payouts. And a requirement to take the money and run, no rebuilding. That might, over 100 years, reverse what happened in the previous 100.

    After Sandy, the cost of our home insurance soared, even with a $20,000 hurricane deductible. Because we are in a “coastal county” and I live within a mile of the Gowanus Canal. Very close to the top of the terminal moraine, the highest point in Brooklyn.

  4. What does that mean for the Florida Keys and Barbuda? Any insurance there now will be hugely expensive, if it is even available. Rebuilding won’t happen if there are no mortgages because no one will insure it.

    1. Rebuilding will occur this time. And rebuilding will occur in the next round of storms. And the one after that. Government will fill the gaps and provide a financial back stop if need be. But over time the accumulated costs are going to make it harder and harder to justify these expenses and the manner in which things are rebuilt is going to tighten up. Increased regulations will make anything small uneconomical while really big things will get bailed out. This is a long slow process that will be most acutely felt a generation from now.

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