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A Dream Blown Away

At all.

"If you feel the price is not right, you pull out," matter-of-factly acknowledges Kurt Karl, head of economic research and consulting with Swiss Re in New York.

Since 1971, "Insured U.S. weather-related losses are growing 10 times faster than premiums and the overall economy," reports Ceres, a coalition whose observations get attention from the big boys in part because they've built a climate-risk network that includes 50 institutional investors managing more than $3 trillion.

Unacceptable Risk

Insurance companies approach climate change bracingly free of theory. They take only an academic interest in whether the wind blows because of increases in carbon dioxide in the atmosphere, or cyclical fluctuations in the Atlantic, or the huffing and puffing of the Big Bad Wolf.

They just want to calculate the odds. They want to know how many chips to put on the table.

And where.

"Two effects are going on," says Nakada, of the risk modeling firm RMS. "Hurricane activity rates have gone up." But also, "Hurricanes are perceived to be longer-lived. These longer-lived hurricanes have a better chance of sneaking up the coast. The view of vulnerability has changed."

The specter looms of the big hurricanes of 1938 and 1954. Those Category 3 hurricanes devastated New England. Storm surges of 13 and 12 feet, respectively, swept through Providence, R.I. Historic markers demonstrate how high the water rose downtown. They are over your head. Photos show seas crashing over the top of a harbor lighthouse. It is 70 feet tall. Beach homes were swept out to sea.

"Our view is that there are some events that have the potential to be so large as to exceed the capabilities of the insurance industry, as well as the funding and financing capability of individual states," says Michael Trevino, the spokesman for Allstate, one of the nation's largest home insurance companies. "Those are events that have the potential to be $100 billion. These events are so enormous, no entity has the ability to manage it."

Some require little imagination, such as a Category 4 hitting Miami or a Category 4 coming up the Houston Ship Channel aimed at the center of the U.S. oil industry, and America's fourth-largest city.

But the one Allstate is focused on is a Category 3 funneling straight north up New York Harbor. Pushing a wall of water perhaps 15 feet tall up Broadway toward the second-story windows of Wall Street.

This is why Allstate has decided not to write new homeowners insurance in the five boroughs of New York City -- Manhattan, Brooklyn, the Bronx, Queens and Staten Island -- plus Westchester County, just north of the city, and the counties that make up Long Island -- Nassau and Suffolk. In the most vulnerable parts of that market, they are also not renewing existing insurance.

"What we decided was that the total insured property values in New York State are about $1.9 trillion. We have a big share of the homes in that state" -- in the eight counties, Allstate's market share was 26 percent.

"Fundamentally, we've got enough exposure, thank you."

To Move or Not to Move

What does this mean for the future of beautiful areas around Washington near big bad bodies of water, from Duck to Rehoboth and from Alexandria to Annapolis?

"If you have a ton of money and don't mind paying three times the insurance as two years ago, you're probably happy," Nakada says. "There'll be all sorts of property available on the coast in warm weather places if the market gets more efficient."

But what about for the rest of us?

"In terms of affecting where people live and do business, three things have to happen: The risk has to go up a lot. And it just did. Number two, the market needs to allow that cost to be passed on to customers, or not. In which case, number three, either the price goes up, or the availability goes down in insurance.

"At that point you would think hard about whether you want to move."

Batten down the hatches.

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