Beware of storm signals by insurers
In arguing that he and his cohorts are being overcharged on homeowners insurance for their coastal South Carolina properties, Daryl Ferguson notes the southernmost part of his state has been hit by devastating storms only twice, in 1893 and 1989 (“Coastal Residents Knock Insurers,” U.S. News, Jan. 4).
In insurance, the sort of catastrophic storms to which Mr. Ferguson refers are generally known as “100-year” storms, so it should not be so surprising that they should arrive about once a century. However, nature does not always follow such clockwork precision. There is about a 1% chance of such a storm striking the area in any given year.
Of course, this presumes that weather patterns are stable, when there is solid evidence that the frequency and severity of such storms may be increasing with higher ocean levels and warmer surface temperatures. Even leaving aside projections of global warming, what has undeniably changed from 1893, and even from 1989, is that there are now many billions of dollars more of property constructed in at-risk, environmentally sensitive coastal regions.
The price signals offered by insurance rates offer a clear warning about the danger of this tremendous concentration of risk. Policymakers who ignore those signals and suppress rates do so at our collective peril.
R.J. Lehmann
Senior Fellow
R Street Institute
Washington
