It was a once in 100-year storm, until the next one blew in the following year.
This statement certainly rings true in this period of unpredictable weather events. Mother Nature’s whims have been especially capricious of late, as anyone with a house or condo in the Mid-Atlantic region can attest. Not just homes along the Eastern shoreline are at risk to substantial damage, given headlines lamenting a higher-than-average wildfire season in the West, flash floods engulfing Washington, D.C., and tornadoes striking western Massachusetts, of all places.
Rare, calamitous weather events are problematic, but what about when they are less rare—as with Hurricane Sandy, which pummeled the Northeast a year after Hurricane Irene and a damaging Nor’easter? For high-net-worth individuals and families, catastrophic property exposures are a significant risk. Many people own second and third homes in areas providing aesthetic value, such as on beaches, along coastlines, in heavily forested mountain regions and in sunny California.
Unfortunately, these same locales are also subject to a broad range of natural disasters. Many high-value homes are vulnerable, as are valuable contents like art collections, jewelry, rare automobiles, antiques and fine wine, to tally a few. While a Ferrari submerged in water for three days and subsequently dried out may look fine, the sorry truth is otherwise.
Following the financial meltdown in 2008, many people diversified into different asset classes like real estate, given the depressed stock prices at the time. They also continued to invest in fine art, rare cars and other valuable collections, as the record prices at auctions attest. The convergence of these investment decisions and increasingly unpredictable weather events would seem to argue that affluent homeowners engage in deeper discussions about the nature and extent of their homeowners and other insurance coverages. Yet this is not always the case.
This point was made clear during a recent discussion with Adam Wolfson, president of Wolfson Insurance Brokerage, an insurance agency serving affluent clients from offices in San Francisco and New York. Adam pointed out that many people often rely on their banks for information regarding the insurance required to transfer physical asset risks, especially in situations involving a very expensive second home like a beach house.