Where Do You Hide?

US Hurricane Risk

The lines on the graph represent the paths of the 50 most deadly US hurricanes on record.  The numbers on the lines are the number of deaths.

One important thing to notice is that there is nowhere on the eastern or southern coasts of the US coast that has not experienced deadly hurricanes.

That suggests two strategies for dealing with hurricane risk for an individual.

  1. Avoiding it by moving well inside the lines.
  2. Building up a residential system that is resilient to the forces of hurricanes.
The first strategy is suspect until you study the risks of those areas.  The area just outside the lines includes the New Madrid fault and an area that has experienced major inland windstorms, hailstorms and floods in the recent past.   So there is no guarantee of safety by risk avoidance.
That leaves resilience as the best bet.  Resilience will involve learning about safety measures, setting a risk tolerance and finding out how strong of a storm fits within the risk tolerance.
In Japan, they set their risk tolerance to be that they would not accept a risk of a storm that is within the range of all past experience.  They thought of that as a zero risk tolerance.  They learned on 311 that their actual risk tolerance (storms within the historical observations) and their notional risk tolerance (zero) were not the same thing.
For an insurer or a business, there are very different options.  Diversification and insurance/reinsurance may be chosen instead of resiliency.
Explore posts in the same categories: Enterprise Risk Management, Insurance Risk


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