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Natural Disasters are now Measurable Default Risks

Growing
numbers of severe weather events throughout the U.S. may be giving new meaning
to “location, location, location” in the housing world.  CoreLogic senior economist Kathryn Dobbyn
writes in the company’s blog “housing Pulse” that the $8 billion in property
damage caused by severe weather in the U.S. in 2013 is causing the housing
industry to think about the risk of any given location’s exposure to natural
disasters which are only expected to
continue to increase in both frequency and intensity.

In some parts of the country, such
as Florida’s hurricane prone Atlantic coast or the Mid-West’s “Tornado Alley”
the risk of unexpected property damage is always there and the mortgage
industry has relied on required insurance to mitigate its risks.  But for a variety of reasons, costs, a lack
of understanding of the risks, or the absence of a requirement to insure
against most specific risks (floods being the exception), many homeowners don’t
maintain adequate coverage, especially for less common or widely known
risks.  Disasters like Hurricane Sandy have
highlighted this but until recently very little could be done to quantify differences
in the risk of a natural disaster from one property to the next.

 

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