An insurance group says Tropical Storm Danny, which is expected to move up the Atlantic coastline this weekend, serves as a reminder of the potential each hurricane season brings – after several years of relative calm winds.

Jeanne Salvatore

“East Coast residents, besides those living along Florida’s Atlantic coast, have been spared from severe hurricanes in recent years, but storms such as Danny offer a stark reminder of the potent threat hurricanes can pose to some of the nation’s most densely populated states,” said Jeanne Salvatore, a spokeswoman for the Insurance Information Institute. “And increased residential development along the Atlantic seaboard has put more and more homes at risk of severe windstorm damage.”

Florida and New York, where coastal areas account for more than half of the states’ overall property value, are particularly susceptible to heavy losses from coastal storms.

The last four years have featured minimal hurricane exposure and damage to the Atlantic Coast. Not since Hurricane Katrina, which caused 1,836 deaths and more than $81 billion in losses in August 2005, has the coastline been hit with a serious hurricane or tropical storm.

Property-casualty insurers have been building their accounts, using a two-pronged approach: increased premiums and strategic cuts on coverage along many coastal areas.

The institute said that while exposure to windstorms and high property values combine to make Florida the state with the highest potential for property losses, New York State, because of Long Island, is second highest, risk modeling companies have found.

A 2007 study by AIR Worldwide put the value of residential and commercial coastal property in Florida at almost $2.46 trillion. This represented 79% of Florida’s total insured property values. In New York that number was $2.38 trillion, representing 62% of the statewide total. Connecticut, Maine and Massachusetts were other East Coast states where insured coastal property values exceeded 50% of the state’s total insured property values.

Special hurricane deductibles were established to make insurance coverage more available and affordable in high-risk areas without pushing those costs on to people living in lower-risk areas. These deductibles usually are expressed as a percentage of the home’s insured value, typically varying from 1% to 5%. The III notes that if a house is insured for $200,000 and has a 3% hurricane deductible, the first $6,000 of a claim arising out of a named storm, the traditional “trigger” for the deductibles to take effect, must be paid out of the policyholder’s pocket.

Alabama, Connecticut, Delaware, Florida, Georgia, Hawaii, Louisiana, Maine, Maryland, Massachusetts, Mississippi, New Jersey, New York, North Carolina, Rhode Island, South Carolina, Texas and Virginia, as well as Washington, D.C., have hurricane deductibles in place.