Hurricane Harvey loss estimates suggest only Katrina may cost US more

Economic loss estimates for Hurricane Harvey continue to mount, with latest figures from RMS placing the cost as high as $90bn. This would make Hurricane Harvey the second most expensive storm in US history, second only to Hurricane Katrina. Risk modelling and analytics firm RMS has estimated economic losses from Hurricane Harvey of between $70bn and $90bn. This takes into account wind, storm surge and inland flooding losses. The firm said the majority of losses are likely to be caused by inland flooding in Houston’s metropolitan area, where there are more than seven million properties worth in excess of $1.5trn. The firm said economic losses caused by wind and sea storm surge will likely be modest at about 10% of total economic losses, which equates to between $7bn and $9bn of RMS’s overall loss figure. An analyst at Moody’s Analytics has reportedly placed overall losses from Hurricane Harvey up to $75bn. This would include property damage of between $30bn and $40bn, $10bn to $15bn in business losses, and $5bn to $10bn for infrastructure. The German-based Center for Disaster Management and Risk Reduction Technology (CEDIM) estimates $58bn of direct loss for Texas from Hurricane Harvey. It puts the range of losses between $41.6bn and $80.2bn. A loss of $58bn would be the ninth largest natural disaster loss of all time, according to CEDIM. Of this $58bn figure, about $19bn is expected to be residential losses, $16bn non-residential, $18bn for government and infrastructure, and about $5bn from durable goods such as automobiles. "The damage is extensive at around $58bn and is over 90% due to flooding. Depending on the next couple of days, we may see this estimate rise, as it only includes Texas at this point," said Dr James Daniell, a senior risk engineer at CEDIM. These latest economic loss estimates would potentially place Hurricane Harvey as the second most costly hurricane to have ever hit the US. It looks set to surpass Hurricane (or superstorm) Sandy, which caused about $70bn of damage. That would only leave Hurricane Katrina, with losses of about $160bn according to the US National Oceanic and Atmospheric Administration, costing more. Earlier in the week, analysts at Panmure Gordon & Co estimated total losses as high as $50m for Hurricane Harvey, causing the share price of several Lloyd’s insurers to fall. Panmure Gordon & Co said Lloyd’s insurer Lancashire Holdings could face a bill of £200m ($259m) from the US storm, while losses for Hiscox and Beazley were forecast at about £100m. Insurance companies have not yet released loss estimates, but share prices dipped on the analyst’s forecast. AIR Worldwide put losses in the $1.2bn to $2.3bn range, but stressed that its initial estimate only included the direct loss from Hurricane Harvey and not the consequent flooding, which it said would be “significant”. Insured loss estimates are yet to fully emerge, but analysts at JP Morgan have estimated that Hurricane Harvey could cost insurers between $10bn and $20bn, putting it in the top ten most costly US storms in history. Michael Young, RMS head of Americas climate risk modeling, said: “Hurricane Harvey has already broken all US records for tropical cyclone-driven extreme rainfall, with observed cumulative amounts of 51 inches. And with the rain still falling heavily and the waters rising, the situation is too fast moving to be stating with certainty what the losses in Texas could be.” RMS said the majority of its $70bn to $90bn loss estimate will be uninsured, because private flood insurance in the region is limited. But the firm stressed insured losses will still be significant. “Although the insured losses will remain uncertain for some time they will be significant, as private coverage is not consistent: there are significant variations in how coverage is provided by individual insurers,” said RMS. Coverage for some of the residential losses has been provided by the National Flood Insurance Program (NFIP). There are approximately 500,000 NFIP policies that will be affected by Harvey, said RMS. Losses to the NFIP will be “very significant” and “potentially the largest ever to date”, it explained. However, it noted that NFIP penetration rates are as low as 20% in the Houston area.

Hurricane Harvey loss estimates suggest only Katrina may cost US more

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