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RMS raises hurricane Ida insured loss estimate to $31bn – $44bn

17th September 2021 - Author: Luke Gallin

Catastrophe risk modeller RMS has estimated that onshore and offshore U.S. insurance and reinsurance industry losses from Hurricane Ida will be between $31 billion and $44 billion, the majority of which relates to wind and surge impacts in the Gulf region.

Hurricane Ida satellite image of landfall. Insurance and reinsurance impactsThe latest estimate from RMS now includes inland flood and National Flood Insurance Program (NFIP) losses for the Ohio Valley, Mid-Atlantic, and Northeast U.S. regions.

For the Gulf region, RMS’ Ida loss estimate is unchanged from its previous range of $25 billion to $35 billion, which includes wind and surge losses of $21 billion to $28 billion, inland flood losses of $1 billion to $1.5 billion, NFIP losses of $2.3 billion to $4 billion, and offshore energy losses of $700 million to $1.5 billion.

In the Ohio Valley, Mid-Atlantic, and Northeast U.S. regions, RMS is anticipating industry losses of between $6 billion and $9 billion, most of which will be borne by the private flood market.

RMS estimates inland flooding impacts across these regions from hurricane Ida of between $4.5 billion and $7 billion, as well as NFIP losses of between $1.5 billion and $2 billion.

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Losses for the Ohio Valley, Mid-Atlantic, and Northeast regions reflect property damage and business interruption to residential, commercial, industrial, and automobile lines of business, as well as sources of post-event loss amplification and leakage of flood losses onto windstorm policies, explains RMS.

All in all, RMS estimates that insured losses from Ida in the U.S. could reach as much as $44 billion, of which between $21 billion and $28 billion relates to wind and surge losses, $5.5 billion to $8.5 billion of inland flood losses, $3.8 billion to $6 billion of NFIP losses, and $700 million to $1.5 billion of offshore energy losses.

“Ida will be remembered as a wind and storm surge event in the Gulf of Mexico, and a flood event in the Mid-Atlantic and Northeast U.S. The storm’s remnants brought historic amounts of rainfall over just a few hours to some of the most exposure-dense areas in that part of the country,” said Jeff Waters, Senior Product Manager, RMS North Atlantic Hurricane Models.

“Many locations from Philadelphia to New York City experienced six-hourly rainfall totals in excess of 100-year return period levels, which is beyond building design standards in that region, causing widespread fluvial and pluvial flooding. The fact that this region also experienced heavy rainfall from Tropical Storm Henri a few weeks prior created saturated antecedent conditions that exacerbated the extent and severity of flooding in Ida.”

Firas Saleh, Director, RMS U.S. Inland Flood HD Model, said: “RMS expects insured losses associated with precipitation-induced inland flooding to be material in the Mid-Atlantic and Northeast, even though a sizable flood protection gap remains. RMS estimates total economic losses from flooding in this region to be over US$15 billion, meaning that the majority of flood damages for this event will be uninsured.

“Many properties in New York and New Jersey had inundated basements in areas outside the designated FEMA special flood hazard areas (SFHAs), which drive the requirement for homeowners to obtain a flood insurance policy. While such losses will unlikely be covered unless they have a flood insurance policy, the pressure to expedite claims processing in this region is likely to cause coverage leakage as frequently seen with storm surge. We expect a portion of the uncovered flood-related losses in Ida to be paid out on wind policies, especially for residential lines without NFIP coverage.”

Hurricane Ida also made landfall in the Caribbean prior to battering Louisiana, bring strong winds, heavy rain and flash flooding to Cube, Jamaica, and the Cayman Islands. RMS expects insured losses from Ida in the Caribbean to be less than $100 million.

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