Tag Archives: Congressional Budget Office

The Rising Cost of Hurricanes – and America’s Ability to Pay

Future hurricanes are going to cost the U.S. more money and, if we don’t act to address this, it will leave the government struggling to cope. That is the finding of a recent Congressional Budget Office (CBO) report which put it starkly:

“…over time, the costs associated with hurricane damage will increase more rapidly than the economy will grow. Consequently, hurricane damage will rise as a share of gross domestic product (GDP)…”

The CBO identified two core drivers for the escalating costs: climate change, which will drive just under half of the potential increases in hurricane damages while just over half of damages will come from coastal development. The four main four variables that would have the most impact were identified as:

  • Changes in sea levels for different U.S. states;
  • changes in the frequency of hurricanes of various intensities;
  • population growth in coastal areas, and;
  • per capita income in coastal areas.

Using Catastrophe Models to Calculate the Future Cost of Hurricanes

To inform the CBO’s research and creation of a range of possible hurricane scenarios based on future changes to the four key variables, RMS hurricane and storm surge risk experts provided the CBO with data from the RMS North Atlantic Hurricane Model and Storm Surge Model.

Through RMS’ previous work with the Risky Business Initiative we were able to provide state specific “damage functions” which were used to translate possible future hurricane events, state-specific sea levels and current property exposure into expected damaged. While we usually produce loss estimates for catastrophes, we didn’t provide the CBO with estimated losses ourselves – rather we built a tool so the CBO could “own” its own assumptions about changes in all the factors – a critical aspect of the CBO’s need to remain impartial and objective.

Solutions to Increase Coastal Urban Resilience

The CBO’s report includes suggested policies that could decrease the pressure on federal spending. The polices range from global initiatives to limit greenhouse gas emissions to more direct mechanisms that could shift costs to state and local governments and private entities, as well as investing in structural changes to reduce vulnerabilities. Such approaches bring to the forefront the role of local resilience in tackling a global problem.

However, therein lies the challenge. Many of the options open to society to increase resiliency against catastrophes, could have a less positive effect on the economy. It’s an issue that has been central to the wider debate about reducing the impacts of climate change. Limiting greenhouse gas emissions has direct effects on the oil and gas industry.  Likewise, curbing coastal development impacts developers and local economies. It has led states such as North Carolina to ban the use of future sea level rise projections as the basis for policies on coastal development.

Overcoming Political Resistance

Creating resiliency in U.S. towns and communities needs to be a multi-faceted effort. While initiatives to fortify the building stock and curb global climate change and sea level rise are moving ahead there is strong resistance from the political arena.  To overcome the resistance, solutions to transition the economy to new forms of energy must be found, as well as ways to adapt the current workforce to the jobs of the future. City leaders and developers should partner to find sustainable growth initiatives for urban growth, to ease the fears that coastal cities will wither and die under new coastal use restrictions.

Initiating these conversations will go a long way to removing the barriers to success in curbing greenhouse gas emissions and limiting coastal growth. With an already polarised political debate on climate change this CBO report may provoke further controversy about how to deal with the factors behind the increase in future hurricane damage costs. Though one conclusion is inescapable: catastrophe losses are going up and we will all be footing the bill.

This post was co-authored by Paul Wilson and Matthew Nielsen.

Matthew Nielsen

Senior Director of Global Governmental and Regulatory Affairs, RMS

Matthew Nielsen leads Governmental and Regulatory Affairs. He is responsible for maintaining relationships with regulators, legislators, and rating agencies on behalf of the company to establish open channels of communication around RMS models and solutions. Matthew is a meteorologist and geographer with extensive experience in North American catastrophe risk. In his prior role at RMS, he was responsible for developing the RMS climate peril models for the Americas, including the severe convective storm, winter storm, flood, and hurricane models. He has conducted field reconnaissance for major catastrophes including Hurricanes Katrina and Sandy. Before joining RMS, Matthew conducted remote sensing in satellite meteorology research at the Cooperative Institute for Research in the Atmosphere (CIRA). He holds a BS in physics from Ripon College, where he won the Henry Knop Award in Physics, and an MS in atmospheric science from Colorado State University. Matthew is a member of the American Meteorological Society (AMS), the International Society of Catastrophe Managers (ISCM), and the American Association of Geographers (AAG).