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A Dream Blown Away

In Delaware, Westfield Insurance has canceled all coastal policies, and "we've been told that there are others who are starting to restrict their coastal writings next year -- bigger players in the market," says Michael Vild, deputy state insurance commissioner. He adds, plaintively, "There have never been hurricane-force winds in the state of Delaware in recorded weather history. We think companies restricting coastal coverage are overreacting. Although if we have a couple more years like 2005, it's going to be extremely difficult to get coverage."

There are 438,000 people living in low-lying Virginia Beach. It is marked by high-rise hotels smack on the water, without even dunes between the boardwalk and the surf.

In October, State Farm stopped writing new insurance on businesses within 2,500 feet of the ocean there. In November, Traveler's Insurance refused to sell or renew residential insurance there without a 3 percent hurricane deductible. On a $500,000 house -- no longer uncommon -- that means if you get hit by a hurricane, the first $15,000 comes out of your pocket.

In Ocean City, new construction has become formidably fortified. Almost all of the island is expected to be underwater in a major blow. But on the ocean side, which will take the brunt of a storm surge -- a wind-driven wall of a water -- local government requires homes to be built on pilings driven perhaps 20 feet into the ground, sticking up some seven feet. Sixteen-inch bolts then attach the beams on which the house is built to the pilings, and each floor joist is attached to the beams with steel straps. The walls and roof are then held onto the beams and each other with more steel.

"I don't know of any other jurisdiction in the state of Maryland that runs the hurricane system we run," says Mike Richardson, Ocean City's chief building official. It is designed to withstand sustained winds of 90 miles per hour with three-second gusts to 110.

Will such fortifications become common around Washington? "Katrina showed us that inland areas are susceptible to flooding," Richardson says. "We're not just talking about the ocean -- we're talking about Chesapeake Bay, talking about Deep Creek Lake flooding. The Potomac has flooded before. So has the James."

Dire Forecasts

So far, climate change has shaken the market most notably in high-value coastal areas. But if weather losses get worse, upheaval will become more common.

There is no question that the insurance industry is focused on how weather losses are getting worse.

In early September, when the leaders of the big European reinsurance companies had their annual gathering -- called the Rendez-Vous, in the posh principality of Monte Carlo -- one of the big discussion points was the gap between supply and demand for reinsurance in U.S. wind-affected areas, according to the industry journal, Reactions.

Reinsurers are the big boys who can throw around numbers with nine or 10 zeroes at the end and still sleep at night. They insure the insurers, buying risk beyond the appetite of ordinary companies. The most romanticized is Lloyd's of London. However, when Swiss Re and Munich Re talk, all conversation in the room ends until whatever is on their minds stops reverberating.

Today, what's on their mind is climate change.

"There are horror stories about the frequency and severity of hurricanes increasing," Reactions reported in September. That plus the skyrocketing number and value of properties on the U.S. coastline "has prompted many to question whether it is possible to write catastrophe business profitably."

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