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September 8, 2023

Safeguarding coastal living: Understanding the risks and solutions for high-net-worth individuals

Josh Gallant, Regional Placement and Solutions Leader

Living on the coast in the United States is a dream for many. The allure of stunning ocean views and a beachfront lifestyle is undeniable. However, it's essential to recognize that coastal living comes with risks, particularly for successful individuals and families. 

The risks of coastal living 

Natural disasters and extreme weather events

Coastal residents make up nearly 30% of the population according to the National Oceanographic and Atmospheric Administration (NOAA). These residents face a higher likelihood of encountering natural disasters, such as hurricanes, tropical storms, thunderstorms, wind events and other severe weather events.  

To fully comprehend the importance of being prepared, it is also critical to recognize that these weather events can happen to almost anyone (i.e., residents on great lakes, oceans, and tidal rivers). Living near any large body of water can put you at risk for weather-related property damage. In fact, the Climate Change Catastrophe Report by Core Logic estimates $56.92 billion in property damage from the largest natural catastrophe events of 2021.  

Our natural disaster compendium is a valuable resource for weather-preparedness tips. By understanding the magnitude of these disasters, you can appreciate the significance of comprehensive insurance coverage.

Some insurance carriers are addressing increased risk and minimizing their financial exposure by non-renewing policies. In fact, The Wall Street Journal details that carriers non-renewing policies are becoming common as more extreme weather takes hold. Carriers are even non-renewing and leaving markets due to financial factors such as litigation, fraud, and increased replacement costs, in addition to the increased severity and frequency of natural disasters. There may also be a need to consider self-insuring certain portions of your risk, albeit with careful consideration of the tradeoffs. Raising deductibles can help manage costs and encourage the use of insurance only when necessary. For further insights on property valuations, refer to our article "Replacement Cost versus Market Value."

Rising sea levels and erosion

Coastal areas are particularly susceptible to the long-term impacts of rising sea levels and erosion, largely attributed to climate change. These changes affect coastal properties and threaten surrounding infrastructures and the people within them.

Rising sea level is one environmental threat to consider when making informed decisions about coastal investments. The global average sea level has risen 8–9 inches (21–24 centimeters) since 1880 and is continuing to accelerate exponentially, according to the NOAA. These rising sea levels threaten infrastructures necessary for jobs and other regional industries, like roads, bridges, subways, water supplies, oil and gas wells, power plants, sewage treatment plants, and landfills. Hurricane Katrina, Hurricane Sandy, and Hurricane Michael were all associated with higher sea levels over time, which ultimately caused these deadly and destructive storm surges.  

Higher insurance costs and limited coverage

Coastal areas often come with higher insurance premiums due to the increased probability of natural disasters and property damage. We are experiencing the hardest personal insurance market in over a generation. Premiums are increasing, and it is harder to get insurance coverage placed.  In high-risk regions, specialized carriers typically underwrite risks differently compared to standard insurance carriers. This could include limitations on the amount of wind or flood coverage a client can purchase – which may cause a gap in coverage relative to the replacement cost of the residence.

Moreover, certain perils may have limited coverage in standard policies, making it important for individuals with more complex risks to seek tailored insurance solutions. Unfortunately, when a carrier sends a "do not renew" notice, mass-market agents may not have the flexibility to provide adequate assistance, given that they represent only one carrier. In such cases, turning to the non-admitted or excess & surplus lines market, which is a market that serves as a place for people to obtain coverage when the regular market is not available, might be necessary.

Solutions for coastal residences 

For owners of coastal properties, a comprehensive risk assessment with a trusted high-net-worth insurance broker is vital. These experts can provide valuable information and insights about coastal risks and help you explore personalized insurance coverage that adequately protects against natural disasters, flooding, and other location-specific risks.

To address the many risks associated with coastal living, it's necessary to consider specialized policies that align with your unique needs. Implementing preventive measures, developing evacuation plans, and establishing emergency preparedness strategies can significantly reduce the impact of natural disasters. Check out our Severe Weather Center to learn more about how to prepare for specific weather-related events.  

Partnering with a trusted broker for comprehensive protection 

When safeguarding your coastal residence, partnering with an experienced, trusted insurance advisor is one of the most important steps. Their knowledge in assessing coastal risks and designing tailored insurance solutions ensures you have the comprehensive protection to face any potential challenges.

Don't wait until it's too late—take action now and work with a broker who understands your requirements. With the right solutions and a dedicated insurance advisor by your side, you can confidently enjoy your life on the coast. Contact Marsh McLennan Agency Private Client Services for a complimentary review to learn more about your options.