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CoreLogic: 2018 was another year of catastrophe

From wildfires in California to massive flooding in the Carolinas, 2018 was another year of horrific, catastrophic natural disasters. CoreLogic released a report this past week breaking down the billions of dollars in property-related damages in 2018 caused by floods, wildfires and other events. Tom Larsen, content-strategy principal for insurance and spatial solutions at CoreLogic, discussed the report and why the company tracks seemingly random natural disaster events so carefully.

Among the various categories of natural disasters, which has done the most damage over time?

tlcorelogicHurricanes and floods are the biggest, most persistent in the U.S. Hurricanes have these massive events that will affect 200,000, 400,000 homes in a single occurrence, whereas floods are pervasive throughout the U.S. The earthquakes are quite dramatic, but they are very infrequent. A hurricane and flood is probably [responsible] for 50 percent [of the overall damage caused by natural disasters]. Hail is massive. It causes damage to homes, but it is not a disruptive one. It won’t destroy your home, like an earthquake.

What was the single-most destructive event of the year?

The most shocking for this year was the California wildfires. We have just completed two years [of fires in California] with each of them a record-breaker, in terms of the severity of damage to homes, property and lives. 

The damage wrought by natural disasters in each of the last three years has exceeded the long-run average. Is this just a random, unlucky patch we are in, or is something else going on?

There are a lot of moving parts in trying to figure out what this curve is. Certainly we have climate change, which is ill-defined and it is very slow moving. That could be occurring. It could be there. A moving part is the migration of the populace. In California, we have a preference to live in risk-prone areas. All Americans potentially like to live near the coast in the hurricane areas. We like to live in flat-river bottoms that tend to flood. So, we are more exposed to risk that is influencing these numbers.

We have natural climate variation. We have decades of really bad years, and really good years. It is notable that when we talk about how bad Hurricane Harvey was, is to include the 10 years prior to that, where it was fairly quiet. We still have these peaks and valleys of catastrophes.

Why does CoreLogic track what appears to be random events that are not predictable?

But they are predicable, in a sense. These large events are reminder of the risks that real property is exposed to. CoreLogic provides data and analytics to support the real estate economy. These events that occur are a reminder that the risk to property real estate are real, whether the house burned, or flooded or whatnot. But for most of the time, this risk is invisible because the catastrophe struck someone else. There are 5 million homes in California that are in high-risk burn areas, but only 20,000 of them burned last year.

CoreLogic is committed to delivering the data to help make this invisible risk more visible to buyers of homes, who are unaware of the risks of a specific area. For people who own real estate, the concept is a better-informed populace, a better-informed owner will make better risk-management decisions, either strengthening a home and mitigation efforts. This is part of a new digital area where you can get this type of information, whereas before you had to do it your own. It was buyer beware. Now we are trying to make that information easily available at an important time for real estate.

Given that we have had three years of horrific damage in lots of different parts of the country, should we expect the same again this year, that California will be on fire and the East Coast will be hit with another wave of flooding?

I am reminded of an old axiom about weather forecasting. The best forecast for tomorrow’s weather is going to be like today; but it is a little bit different than that. There is variability. What we are talking about is that these are very extreme events and, in most cases, they are independent. So, we don’t expect an extreme catastrophe every year. That said, we should always be cautious, and know [whether we are] in an area that has a higher risk. Certain areas of California are very risk-prone. Others are not. For the whole U.S., we should always be conscious and prepared for a major catastrophe, but I think it is too cautious to expect to continue at this kind of level.  

If you are an individual or somebody involved in the mortgage or real estate industry, how can you use this data?

For a real estate agent, it means you now have a better-informed decision to help your clients choose the right location. The axiom remains the same: It is location, location, location. This kind of data helps you extend your intuition into knowing the neighborhood better. These risks do change house by house, especially for a flood. It is the key to resilience. Resilience is a theme in a lot of risk management. The key is knowing what can happen and being able to prepare at least a mental plan on what to do. We are committed to helping people know the risk, be able to make those risks apparent and make better decisions.


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