Extreme event modeling firm AIR Worldwide estimates that industry
insured losses to onshore property resulting from
Hurricane Ida’s winds and storm surge will range from
USD 17 billion to USD 25 billion. AIR Worldwide
is a Verisk (Nasdaq:VRSK) business.
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 the impact of demand surge. The industry loss
estimates also reflect an adjustment to account for
increased material and other repair costs in the current
construction market. Hurricane precipitation-induced flood
losses are not included in AIR estimates at this time.
Ida traveled over very warm Gulf waters, including a thick
layer of warm water in the Loop Current, and intensified
to make two landfalls in Louisiana, both at Category 4
strength, on August 29. The storm’s first
landfall was near Port Fourchon about 60 miles south of
New Orleans, with a maximum sustained wind speed of 150
mph; its second landfall was southwest of Galliano, with
a maximum sustained wind speed of 145 mph. Around the time of
landfall, the storm was undergoing an eyewall replacement. In
practical terms, New Orleans experienced strong winds on the
order of 90 to 100 mph due to the
large windfield and a slow decay of the storm.
The storm surge Ida produced was along expected lines
and generally not as severe as Hurricane
Katrina’s—particularly in Mississippi and New Orleans (the latter
of which was fully protected by the city’s levee
system)—but some areas of southeastern Louisiana with insufficient
protection experienced severe storm surge during
Ida.
According to analysis by Wood Mackenzie, a sister company
in the Verisk family, Hurricane Ida has had a significant impact on
Louisiana refinery operations and Gulf of Mexico production,
causing a historic U.S. crude supply chain disruption. Utility
disruptions caused by lack of power, mobile data services, and
water, could lead to Ida becoming a long-tailed
event when it comes to claims reporting,
payouts, etc.
While New Orleans’ levees held, the city was not
spared Ida’s wind impacts. Damage was variable given the
nature of building inventory in the metro New Orleans area. Areas
close to where Ida made landfall such
as LaFourche Parish, where Port Fourchon is located, was
particularly hard hit with widespread
destruction. Grand Isle Parish, a barrier island, has been
declared uninhabitable. Even in towns just
inland from where Ida came ashore, such as Galliano and
Houma, wind damage was severe to catastrophic.
In terms of storm surge, most levees held up well, with a few
localized failures that have created flooding beyond that from
storm surge. Communities to the north, west, south, and
east of the hurricane protection system that
surrounds New Orleans were inundated. Ida’s storm surge
inundated far into the bayous and inhabited areas
of southeastern Louisiana, as well as areas near Lake
Pontchartrain. Minor near-coastal
inundation also occurred in Mississippi and
Alabama. Key areas flooded by storm surge in Louisiana
include Port Fourchon, Grand Isle, Delacroix, Alliance,
Lafitte, Jean Lafitte, Barataria, Laplace, Mandeville, Braithwaite,
Shell Beach, Galliano, Golden Meadow, and Venetian
Isles. Surge inundation depth exceeded 10 feet in some
places, but several tide gauges near maximum storm surge
broke, leading to uncertainty in Ida’s maximum storm surge
water level. Louisiana has a statewide adoption of the
Louisiana State Uniform Construction Code. These codes were adopted
and have been effective since early 2018. According to these
standards, buildings are required to be designed to a
prescribed wind speed that varies spatially with higher design
wind speeds along the coast and the values decreasing as we move
inland. For Port Fourchon and Grand Isle, the design
3-second gust wind speeds for typical residential and
commercial structures is between 160 and 170 mph. For
towns such as Golden Meadow, Galliano, Dulac, and the southern
portions of Houma, design requirements are between
150 and 160 mph on 3-second gust basis. New
Orleans, Lockport, and towns along Route 90 require buildings
to be designed to winds of 140 to 150
mph 3-second gust.
Commercial buildings with higher human occupancy
requirements and those serving essential functions such as
hospitals are typically subject to more stringent requirements
per the IBC, given the risk category in which individual commercial
buildings fall. Generally, Hurricane Ida was below the design
standards for structures built under these standards. Widespread
catastrophic structural failure was therefore not
expected. Buildings that are older and predate the adoption of
some of these standards can be expected to perform worse and
sometimes become debris sources that can impact adjacent newer
buildings. While adoption of building codes is one aspect, an
equally important aspect is their enforcement. While enforcement is
good for coastal counties, the same is not true for inland
counties. Therefore, as Ida trekked through the state and
continued to produce damaging winds, damage can be expected to
buildings across the entire state.
According to AIR and Xactware®, a sister company within
Verisk, 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. Repair costs are
still up significantly.
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. 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.
One other important aspect of demand surge to note is
that after Hurricane Katrina, about half of the population of New
Orleans moved away and the city never returned
to pre Katrina population levels. This mass
migration probably mitigated economic demand surge,
which was not as great as it might have been after that
storm.
About AIR Worldwide AIR Worldwide (AIR) provides risk
modeling solutions that make individuals, businesses, and society
more resilient to extreme events. In 1987, AIR Worldwide founded
the catastrophe modeling industry and today models the risk from
natural catastrophes, terrorism, pandemics, casualty catastrophes,
and cyber incidents. Insurance, reinsurance, financial, corporate,
and government clients rely on AIR’s advanced science, software,
and consulting services for catastrophe risk management,
insurance-linked securities, longevity modeling, site-specific
engineering analyses, and agricultural risk management. AIR
Worldwide, a Verisk (Nasdaq:VRSK) business, is headquartered in
Boston, with additional offices in North America, Europe, and Asia.
For more information, please visit www.air-worldwide.com.
Kevin Long
AIR Worldwide
01-617-267-6645
klong@air-worldwide.com
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