Seventy-five years ago last month, The Great New England Hurricane, or the Hurricane of ’38, altered the southern New England coastline and perception of the region’s vulnerability to severe weather. Since then, meteorologists have made huge advances in hurricane forecasting unimagined in the 1930s, while communities have built storm barriers and coastal fortifications. But we’re still vulnerable. Karen Clark, whose consulting firm advises businesses and insurance companies on catastrophe risk and modeling, has developed new tools for estimating the losses that will occur from different storm tracks. She recently released a report on what we could expect if a storm like the Hurricane of 1938 landed in New England today and discusses that and other unpleasant scenarios.
PBN: Why did you decide to look back at the Hurricane of 1938?
CLARK: Well, the 75th anniversary and to illustrate what the losses would be if a similar storm happens today. The report illustrates why our technology is more insightful than the catastrophe models. Models were never designed to do this, but what has happened over the last decade is companies are very focused on the 1 percent probable maximum loss number. Ratings agencies and regulators will look at this one number and peg lots of stuff to that, like a company’s capital requirements. It is a little bit crazy because this number is highly uncertain.
PBN: We have a lot more buildings along the coast now than in 1938, but we also have better defenses, such as the hurricane barriers here in Providence and New Bedford. Are we more vulnerable to extreme losses from a similar hurricane than we were 75 years ago?
CLARK: You have to separate wind damage from flood damage, because insurance companies are covering wind damage. For wind we would have a lot more exposure than we would have in 1938 because there are a lot more buildings and they would cost a lot more. We calculated if we took the footprint of the 1938 storm, there is more than $13 trillion in property value in the footprint. We have an enormous built-up residential, commercial infrastructure that is going to have wind damage. Those aren’t going to be protected by the hurricane barriers. Now if we look at the flood damage, the most important thing is most of the flooding damage is not going to be insured.