Americans yearn for waterside land
As pictures of the devastation in New Orleans and along the coasts of Mississippi and Alabama make clear, Hurricane Katrina did not discriminate. All socioeconomic levels were hit: The rooftops of old, weathered cottages and new, five-bedroom homes alike are surrounded by water. Low-income housing complexes are no longer habitable, and waterfront mansions are a shambles.
Katrina is expected to cost as much as a record $26 billion, yet no matter how much destruction each hurricane season brings, the appeal of sun and surf along the Atlantic and Gulf coasts does not subside. Luxury condominium developments increasingly populate beach areas, and retirees flock to gated communities and golf courses by the sea in Florida and the Carolinas. Real-estate developers pay prime dollar for oceanfront land and have no trouble finding buyers.
Will Katrina's destruction change that?
"It's not going to slow down," says Chip Law, a research analyst who covers the insurance industry for SNL Financial. "There is a limited amount of coastline. People think a hurricane might not hit, or it might not flood for 20 years, and they don't want to miss the chance to have that beach home."
As for the insurers, Law says, they will continue to take on risk if it's profitable. They will just raise rates, as they have done year after year in Florida.
"There is always someone willing to take on that risk," he says. Much of the damage from Katrina will be paid for by the federal government, which underwrites flood insurance policies. Homeowner's policies will cover wind-related damage.
Beachfront homes along the sunny shores of the Atlantic Coast will be filled this Labor Day weekend, even as residents there are well aware that the next big one could hit them. Until it does, however, they enjoy it while they can. Even as the cleanup starts in the Gulf, the building continues in equally vulnerable areas.
The insurance industry is bracing for a flood of claims. And members of the National Association of Insurance Commissioners will have a little extra time to ponder hurricane-related issues before their next annual meeting.
It was to have taken place September 10 in New Orleans.
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