RMS: Hurricane Harvey to cost insurers up to $40bn

Hurricane Harvey’s insured loss estimates have risen to between $25bn and $35bn and could be as high as $40bn, according to RMS. Potential total economic losses are running three times higher, at between $70bn and $90bn. The estimates include losses from wind, storm surge and inland flooding from the category 4 hurricane that held over Texas for a week before moving on to Louisiana. RMS said the estimate also includes gross losses of $7bn to $10bn incurred by the US National Flood Insurance Progam. Inland flooding will account for the bulk of Harvey’s losses, RMS said, at an estimated $20bn to $35bn in Texas and $1bn to $2bn in Louisiana. RMS said the extent of flood damage will exceed both insured and economic losses recorded by Superstorm Sandy in 2012. Losses from Harvey’s winds are thought to be much lower at $2bn to $3bn, while losses from storm surge are estimated to be below $100m, RMS said. “Although Harvey was a category 4 storm at landfall, the point of landfall along the coastline of Texas is less densely populated than other coastline areas, which has limited the magnitude of the overall total wind- and surge-related losses,” said Michael Young, head of US climates modelling at RMS. He added: “The behaviour of the storm is almost without precedent, and Harvey has already broken all US records for tropical cyclone-driven extreme rainfall.” On publishing its global catastrophe report for August, Aon Benfield’s Impact Forecasting noted that Hurricane Harvey was the first hurricane to make landfall in the US since Hurricane Wilma in 2005. Steve Bowen, Impact Forecasting director and meteorologist, said: “Hurricane Harvey’s landfall in the United States officially put an end to the 11-year major hurricane drought. The impacts from the cyclone were far-reaching, and the scope of flood damage in Houston – the nation's fourth largest city – was historic. “Given the anticipated costs from direct damage and business interruption, it is expected that Harvey will eventually be recorded as one of the costliest natural disasters on record in the US. Harvey served as a challenging reminder of how catastrophic hurricane events can be, and with September being the peak of the Atlantic hurricane season, the risk of further storms remains high,” he added. Experts at Marsh said flood risk from Hurricane Harvey continues to pose a threat to energy facilities along the US Gulf Coast. Marsh said: “Ageing energy facilities and new construction projects remain particularly vulnerable to the continued risk of flooding during the 2017 US hurricane season.” The broker said storm and flood losses at Gulf Coast energy facilities have been recorded almost every year since 1970 and in particular following Tropical Storm Allison in June 2001 and Hurricane Ike in September 2008. Marsh said particular risks post-Hurricane Harvey include fire caused by overwhelmed drainage, as well as the failure of back-up generators and potential losses linked to problems with restarting facilities, including property damage, business interruption and injuries in cases where practised operating procedures are lacking.

RMS: Hurricane Harvey to cost insurers up to $40bn

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