After analyzing the precipitation-induced flood impacts from Hurricane Ida, AIR now estimates that Ida’s insured industry losses will range from USD 20 billion to USD 30 billion.
Included in the estimates are losses to onshore residential, commercial, industrial properties, and automobiles for their building, contents, and time element coverage, as well as estimated insurance take-up rates for wind and flood across the entirety of Ida’s track, including the flooding that occurred in the Northeast. Please note that AIR’s losses do not include any estimate of losses from the National Flood Insurance Program, or any losses from offshore assets.
ALERT™ subscribers can now download Touchstone® and Touchstone Re™ event sets covering wind, storm surge, and precipitation-induced flood, as well as shapefiles for Hurricane Ida’s precipitation-induced flood, from the Downloads tab. The information provided herein is strictly confidential and is solely for the use of AIR clients; disclosure to others is prohibited unless noted in your AIR software license.
Please note: The wind and storm surge footprints in the Touchstone and Touchstone Re event sets are unchanged from the previous release on Friday, September 3. The only change in this updated event set is the addition of precipitation-induced flood. A license is required to generate precipitation-induced flood losses with this event set in Touchstone.
AIR estimates wind and storm surge losses will range from USD 17 to USD 25 billion, and private-market insured losses from precipitation-induced flood will range from USD 2.5 billion to USD 5 billion.
The industry loss estimates also reflect an adjustment to account for increased material and other repair costs in the current construction market. Based on our analysis of the current market conditions, AIR estimates losses will be 9–15% above the modeled results. It should be carefully noted that this 9–15% adjustment is an industry average expectation. Thus, this adjustment has been applied only to the industry loss range quoted above and is not explicitly included in the Touchstone and Touchstone Re event sets. As the impact of these market conditions could vary significantly from company to company, we recommend that clients make their own adjustments to replacement values to account for these conditions. Further discussion of the impact of current market conditions can be found later in this summary.
See below for additional information:
AIR’s modeled insured loss estimates include:
· Insured physical damage to property (residential, commercial, industrial, auto), both structures and their contents from winds, wind-borne debris, storm surge, and precipitation induced flooding
· Additional living expenses(ALE) for residential lines and business interruption losses for commercial lines
· A 5% leakage is assumed to estimate the amount of damage/losses caused by storm surge attributed to wind for residential lines
· The losses reflect the insured estimates of precipitation-induced flood supported by the private flood residential market
· The loss estimates for commercial and industrial lines reflect insured estimates of precipitation-induced flood and storm surge, which is a combination of leakage and take-up depending on the market segment
· For the automobile line, estimates reflect AIR’s view that insurers will pay for all the precipitation-induced flood and storm surge damage in addition to damage from wind
AIR’s modeled insured loss estimates do not include:
· Losses paid out by the National Flood Insurance Program
· Losses arising from hurricane-spun tornadoes, particularly in the inland and northeastern states impacted by Hurricane Ida
· Losses arising from trees uprooting and falling on homes due to saturated soil conditions in parts of the impacted inland and northeastern states, some of which could end up being paid as wind-related claims
· Losses to inland marine, ocean-going marine cargo and hull, and pleasure boats
· Losses to uninsured properties
· Losses to infrastructure
· Losses from extra-contractual obligations
· Losses from hazardous waste cleanup, vandalism, or civil commotion, whether directly or indirectly caused by the event
· Loss adjustment expenses
· Losses for U.S. offshore assets and non-U.S. property
Hurricane Ida Recap
Ida began as Invest 99L in the west-central Caribbean Sea, strengthened as it moved through the Caribbean and into the Gulf of Mexico, and became a hurricane on August 28. Hurricane Ida continued to strengthen through August 29 and made its first landfall as a Category 4 storm near Port Fourchon, Louisiana, about 60 miles south of New Orleans, at 11:55 a.m. CDT that day, with a maximum sustained wind speed of 150 mph. Ida made a second landfall just hours later at 2 p.m. CDT southwest of Galliano, Louisiana, with a maximum sustained wind speed of 145 mph. The storm produced heavy rains and dangerous storm surge.
Ida remained a Category 4 hurricane for four hours after landfall, and was then a Category 3 hurricane for another four hours, which has been attributed to the brown ocean effect and the flat terrain of Louisiana. As the storm moved further inland and northeastward, rapid weakening occurred and Ida was downgraded to a tropical depression on August 30. On September 1, Ida was downgraded even further to an extratropical low as it moved over the Appalachians and into the Northeast, where it combined with a frontal zone and produced prodigious rainfall on September 1 and into September 2. The Central Park weather station recorded 3.15 inches of rainfall in one hour on the night of September 1, breaking the record set a few days prior by Tropical Storm Henri. Up to 9 inches of rain fell over only a few hours across the region. The storm briefly regained tropical-storm–force winds before moving into the Atlantic on September 2.
Reported Damage and Disruption
The remnants of Hurricane Ida doused the Northeast and caused flooding damage and disruption across the region (more information on the impacts of Ida’s wind and storm surge can be found here). Flooding was reported from Pennsylvania to Massachusetts, with New York, New Jersey, and Pennsylvania bearing the brunt of the impact.
Homes and businesses across New York, New Jersey, and Pennsylvania were flooded, and hundreds of thousands of customers across the three states lost power. The entire NYC subway system was temporarily shut down due to flooding, and service remained either entirely or partially suspended on September 2. Multiple roadways were underwater, including sections of Highway I-95, a major artery; media images showed waist-deep water on roads in Staten Island. Newark Airport temporarily halted flights due to flooding but resumed operations on September 2. In Pennsylvania, media images showed I-676 in Philadelphia entirely underwater, and homes, roadways, and businesses were flooded when the Schuylkill River exceeded its banks. Officials have attributed at least 50 deaths across six states to the flooding brought by Hurricane Ida’s remnants, some of which occurred due to basement apartments or cars filling up with water faster than people could escape them.
New York, New Jersey, and Pennsylvania declared states of emergency due to hazardous flood conditions, and the U.S. National Weather Service issued the first-ever Flash Flood Emergency for parts of New York City. On September 8, President Biden approved major disaster declarations for the six New Jersey counties of Bergen, Gloucester, Hunterdon, Middlesex, Passaic, and Somerset, and the five New York counties of the Bronx, Queens, Kings, Richmond, and Westchester. Government officials are only now able to begin touring the damage caused by Ida’s remnants, which may reveal further impacts.
In addition to the precipitation-induced flood impacts, damage was reported across several states due to hurricane-spun tornadoes. Further, some of the neighborhoods across the inland and northeastern states saw damage resulting from trees falling on homes. There were reports of many trees uprooting due to antecedent saturated soil conditions due to rainfall from Hurricane Henri a few weeks ago. Claims arising from these would be paid under the wind category. The event set that accompanies this summary only captures the impact of precipitation-induced flooding in the interior and northeastern states, in addition to the Gulf region where Hurricane Ida made landfall. Losses due to the aforementioned scenarios would not be considered in the event set.
There remains some uncertainty as to how the industry will pay claims from Ida’s flooding impacts. During a recent visit to Louisiana to survey damage, President Biden indicated a willingness to put “as much pressure as we can” on insurance companies. To date, political pressure has been centered around evacuation orders and related additional living expense claims; given the proportion of flood-related losses estimated to be uninsured, however, it is possible that a similar push could occur with respect to flood damage. Policy endorsements such as water/sewer backup could theoretically see losses, driving up the insured loss total, especially if carriers receive more political or other external pressure to do so.
According to AIR and Xactware analyses, materials costs have gone up significantly in the past year from supply chain disruption in the construction market. Although these costs have moderated since their peak in July when they were 80% higher than September of last year, they remain about 30% higher. (Please click this Xactware link for more details.) Repair costs are still up significantly.
The bottom line is that reconstruction costs are more expensive today than they were a year ago. The increase in the total reconstruction cost index means that costs are higher on average nationally; this affects the low- as well as the high-severity events. The difference in magnitude of the impact will come from the mix of construction materials used. For example, minor wind losses are less likely to require repairs that use more expensive inputs such as structural lumber; however, dwellings that are a total loss would require a broader mix of inputs that reflect the higher increases indicated by the total reconstruction index. These increases are outside the scope of demand surge, which tries to answer the cost increase question from a post–extreme event perspective. Therefore, companies should bear these increases in mind and should expect the average claim to be higher before considering demand surge.
An additional source of uncertainty related to materials cost demand surge is the cost of diesel fuel, which has been impacted by the shutdown of refineries during Ida; this fuel would be used to transport materials. While some of these facilities were undamaged, the uncertainty around the timing of the restoration of the power grid and lack of electricity in the meantime is going to keep some of them from coming back online and contributing to the diesel fuel supply. For more details, please click this Wood Mackenzie link.
This is the final ALERT planned for Hurricane Ida.
AIR ALERT Team