In the midst of hurricane season, CoreLogic released its storm surge analysis for the year, counting more than 6.5 million homes at risk of hurricane damage and a total of $1.5 trillion in total reconstruction costs for these homes. Importantly, CoreLogic noted a large portion of homes susceptible to flood damage are not located within Federal Emergency Management Agency (FEMA) flood zones and therefore are not required to carry flood insurance.
"Fully understanding the number of homes and financial impact of sustaining storm surge damage is critically important for financial institutions, corporate entities and local governments to make better informed risk management decisions," CoreLogic stated.
Furthermore, the analytics firm said, "Recent regulatory guidelines are compelling financial services companies subject to federal stress testing to understand under-insured or uninsured risks like storm surge flooding, since exposed properties have a significant risk for default following an event."
CoreLogic identified several major metros where a high percentage of homes are at risk for storm surge damage but are not within FEMA flood zones. In the Virginia Beach metro, 86 percent of homes fall into this category. In the Philadelphia metro, the ratio is 85 percent; in Jacksonville, Florida, it is 76 percent; and in the New York metro, 68 percent of homes are at risk of storm surge damage but not required to carry flood insurance.
According to CoreLogic, if a home lies outside FEMA's flood zone, it is unlikely the homeowner has flood insurance and in fact "may not be aware of the potential risk storm surge poses to their properties."
CoreLogic warns that homeowners and financial institutions should not allow last season's uneventful storm season to deemphasize the possible risk of damage to the millions of vulnerable properties in the country.
"Though the 2013 hurricane season will be remembered for the fact that no storms made landfall along the U.S. coast, this reprieve from hurricane-related damage should not lead to complacency in preparing for future storms and the potential life-threatening conditions they can bring," said Thomas Jeffery, senior hazard scientist for CoreLogic Spatial Solutions.
Among the 19 states CoreLogic examined, the five states with the greatest number of properties at risk are Florida (2,488,277), Louisiana (738,165), New York, (466,919), New Jersey (445,928), and Texas (434,421).
The five states with the highest possible reconstruction costs are Florida ($490 billion), New York ($182 billion), Louisiana ($161 billion), New Jersey ($134 billion), and Virginia ($92 billion). These values reflect the total cost of reconstruction should all susceptible homes be completely destroyed in storms this year.
The total potential reconstruction cost for homes on the Gulf Coast is about half that of potential costs on the Atlantic Coast, according to CoreLogic, which calculates $545 billion in reconstruction costs along the Gulf Coast and $951 billion for the Atlantic Coast.
"Storm surge data is highly useful for insurance providers and financial services companies, as it enhances the understanding of potential exposure to water damage for homes, including those that do not fall within the designated FEMA flood zones," CoreLogic stated.