Virus-Hit Cities in Hurricane Zone Get Moody’s Warning on Risks
(Bloomberg) -- American states and cities are dealing with disease, economic collapse and civil strife in the streets. For those in the southeast, Mother Nature’s coming next.
Moody’s Investors Service says this year’s hurricane season poses increased risks for state and local governments along the Atlantic and Gulf coasts that are still struggling to recover from the coronavirus health and economic crisis.
“The disruption, property damage, and costs of recovery from a natural disaster event in the coming months would compound governments’ coronavirus health and fiscal challenges,” Pisei Chea, an analyst at Moody’s, wrote in a report co-authored by five other analysts published Tuesday.
The group said that if the virus does not ease by peak hurricane season in late summer, governments may need to evacuate certain areas and set up shelters that still adhere to social distancing measures, meaning potentially higher costs than past response efforts. Residents wary of the spread of Covid-19 may also choose not to evacuate, which may complicate rescue efforts. At the same time, potentially crowded shelters may lead to spread of the virus, according to the report.
Hurricanes have become more violent and more expensive because of climate change, which is a growing concern for investors in the $3.9 trillion municipal bond market.
BlackRock, the word’s largest asset manager, said in a May 30 report that investors “must consider the added risk of climate change” since it poses a “dual threat” to places and counties already struggling to recover from the pandemic.
By using climate data assessment, the firm found some counties are exposed to annualized gross domestic product losses up to 2.5% over the next 10 years above the GDP forecast without any pandemic risk. That leads to the risk for rising bond yields ranging from 25 to 80 basis points, depending on the speeds of their recoveries, according to the firm’s report. The areas that are exposed to both climate change and pandemic risk will see worse losses.
For example, Miami-Dade County in Florida is forecast to see 0.88% annualized loss of GDP over the next 10 years due to Covid exposure, according to BlackRock’s estimates. That projected loss jumps to a combined 2.6% annualized loss when hurricane exposure is taken into account.
“Local finances become even more dire after considering the potential for climate change related risks over the next decade,” wrote BlackRock’s Amit Madaan and Michael Kent.
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