Who doesn’t love an ocean view? Some 127 million people certainly do.
, 127 million people currently live close to the water in the U.S.’s 254 coastal counties that stretch across 23 states. While coastal areas account for less than 10 percent of the contiguous U.S., they are home to almost 40% of the U.S. population.
Such numbers show that coastal areas are far more crowded than other parts of the U.S. It also means that issues impacting these areas -- flooding, hurricanes, rising sea levels, erosion, and other climate-related issues -- affect a larger proportion of the population, presenting unique risk management challenges.
Insuring community property
Natural disasters aren’t new, but their frequency and severity appear to be increasing. When more people and property are in weather’s way, significant losses occur.
The 色多多视频 Information Institute’s recent draws a correlation between population growth and potential hurricane property damage. Citing 2020 US Census data, four states with coastal exposure to hurricanes have experienced double-digit percentage population growth since 2010: Florida (+14.6%), South Carolina (+10.7%), Georgia (+10.6%), and Delaware (+10.2 %).
Homeowners and businesses in many coastal areas may find it difficult to find property insurance. It’s no different for municipalities when seeking to insure diverse portfolios that include water and wastewater treatment plants, recreational sites, public works facilities and a variety of real estate holdings.
Many are turning to Excess & Surplus (E&S) insurance for their property coverage. E&S is part of a specialty market that insures risks standard carriers won't cover. Having paid out significant losses from past hurricanes, storm surges and floods, “admitted” insurance companies have had to significantly increase premium rates, restrict coverage, and limit capacity. Some have pulled out of the market altogether.
Admitted insurers are licensed and regulated by the states where they operate. Non-admitted E&S insurance companies, however, are not subject to most of the rate and form regulations that govern admitted insurers. This allows the E&S market to exercise a fare degree of flexibility for innovative underwriting and product development.
E&S insurers are not providing property coverage without assuring that communities are taking proper risk management precautions or loss prevention measures to minimize property damage. Coastal communities need to show they take preparedness seriously.
Municipalities provide residents with a variety of services that pose risks to the coastal environment. From treating wastewater to maintaining sewer lines, landfills and recycling centers, and transportation facilities, municipalities carry significant operational environmental liabilities.
Protecting community marine services
People often gravitate towards the coast because of ample recreational boating and fishing opportunities… and beach access. These communities also share their space with valuable wetland habitats and wildlife. They have to be equipped to serve and protect their assets and local environment both on land and on water.
As coastal communities have grown, so has the need for diverse marine operations. Local government marine services have expanded to better protect coastal resources and public safety. Recently, . According to its police chief, “With the explosion of recreational boaters and the ever-increasing popularity of the Barnegat bayfront, the need for waterborne resources and response options increases by the day.”
Municipal marine services typically include:
- Public marine transportation: Many states and communities along waterways operate ferries, water taxis, and other vessels to alleviate congestion on roadways and meet public transportation needs. For example, the state of Washington is the largest operating public ferry system in the US. In 2021, its 21 ferries carried more than 17.3 million passengers across the Puget Sound and the greater Salish Sea.
- Police marine units: Local police forces, for instance, are often enhanced with the addition of marine police or harbor patrols. These specialized law enforcement units conduct boating safety inspections, speed enforcement on the communities’ waterways, and other law enforcement functions. In many instances, a community’s Marine Unit will actively work with the U.S. Coast Guard, and other County, State and Federal agencies in the areas of drug interdiction, human smuggling, safe boating operations and training.
- Fire boats: Many communities along the coast, especially larger cities, provide firefighting services on the water. The New York City Fire Department (FDNY) is the largest and busiest fire department in the U.S. FDNY Marine Operations protect 560 miles of waterfront. The FDNY’s three marine companies deploy large fire boats and smaller, secondary rescue boats to respond to various marine-related emergencies.
- Lifeguard operations: Communities nationwide are currently struggling with a lifeguard shortage. Lifeguard operations provide a variety of services. For instance, in addition to daily beach and boating safety unit operations, San Diego Lifeguards also operate two special rescue teams. The river rescue team rescues persons or animals throughout the city during periods of flooding. The dive rescue team conducts underwater search and recovery operations and underwater criminal investigations in collaboration with the San Diego Police Department.
- Municipal marinas: Many coastal communities operate their own marinas. In addition to general liability risks common to all operations, marinas have exposure to drownings, boating accidents, and environmental liability.
To protect these assets, municipalities and other government agencies rely on such coverage as AXA XL’s admitted Marine Hull and Liability insurance. Hull and Protection & Indemnity (P&I) insurance protects municipal fleets from first-party vessel damage and third-party liability arising from the operation of a vessel. Marine General Liability insurance and Marina Operators Legal Liability insures Premises Liability for marinas and other municipal marine operations.
Safeguarding coastal environments
Municipalities provide residents with a variety of services that pose risks to the coastal environment. From treating wastewater to maintaining sewer lines, landfills and recycling centers, and transportation facilities, municipalities carry significant operational environmental liabilities. These assets and other properties acquired and managed over many years can also have unknown historic environmental exposures.
Everyday operations at a marina could result in a pollution condition, which can spread quickly in water. Recently, the Northport Village Marina on Traverse Bay, just north of Traverse City, Michigan, had to temporarily close after into the water. The U.S. Coast Guard was also brought in to provide oversight and help with cleanup.
Coastal communities need to mitigate this risk to the environment. Balancing tight budgets, many municipalities buy environmental insurance to protect their finances, reputation, and the environment. A Pollution & Remediation Legal Liability policy helps protect property owners against loss from a sudden or gradual pollution condition, providing coverage for cleanup costs, among other expenses.
Final thoughts on insuring coastal communities
Coastal communities continue to grow. Local municipal governments will try to keep pace by expanding services to protect their residents and their local environment. Fortunately, specialty insurance markets offer property, marine and environmental coverages, which protect valuable community service assets and help address unique risks.
Brett Musser is AXA XL’s Marine Liabilities Product Manager. He can be reached at brett.musser@axaxl.com.
Chris Lee is head of AXA XL’s E&S Property business. He can be reached at christopher.lee@axaxl.com.
