Where Everything’s Bigger Except the Insurance

It was just three years ago that Hurricane Rita stormed the Texas coastline, mere weeks after Katrina flattened Louisiana. While New Orleans struggles to rebuild, Texas seems to have forgiven, forgotten, and embraced the sunny weather. The Houston Chronicle reports that development values along the state's picturesque Gulf Coast have tripled since Rita.Though real estate agents may be celebrating, the trend is causing consternation among insurance companies, which would be called upon to cover the region's $64 billion of development should another bad hurricane season get Texas in its sights. At present, the Texas Windstorm Insurance Association has just $1.4 billion on hand for such an eventuality.

The Chronicle article gives a breakdown of how insurance firms might cover the remainder. But the upshot is that after such a payout, many insurance companies might stop selling insurance in the hurricane-prone areas entirely, leaving homeowners (anything but) high and dry.

But what's the chance of another bad hurricane season? Well, hurricanes are fueled by warm water. And though the ocean is unruly, over the long term it's slowly warming along with the atmosphere. That's likely to make hurricanes more intense, a conclusion long argued by MIT's Kerry Emanuel and covered on an insurance news site just three weeks before Katrina struck. Here's one powerful industry, at least, that's sitting up and taking notice of the problem - even if it's largely by raising premiums or getting out of the market.

(Image: Rita wedges herself into the 500-mile gap between New Orleans and Cancun. Hat tip: Surfrider)