Ida insured losses to jump on inland flooding, material in some regions: RMS

Catastrophe risk modeller  RMS has increased its estimate of total insured losses from Category 4 Hurricane Ida as losses from inland flooding in the Mid-Atlantic and Northeast regions have emerged to be higher than predicted.

The new estimate of total onshore and offshore US insured losses from Ida is between $31 billion to $44 billion, including losses to the National Flood Insurance Program (NIFP) and the private flood market. It builds upon the earlier industry loss estimate of $25-$35 billion for the Gulf of Mexico region.

The new forecast reflects insured wind, storm surge, and a further $6 billion to $9 billion from precipitation-induced flooding in the Atlantic states. Losses to the NFIP in the US are expected to be in the range of $3.8 billion to $6 billion, with $1.5 billion to $2 billion expected to come from the Ohio Valley, Mid-Atlantic, and Northeast states.

RMS said the majority of the insured flood losses in the Ohio Valley, Mid-Atlantic, and Northeast US regions – between $4.5 and $7 billion - will be to the private market, with an additional $1.5 to $2 billion to the NFIP. Losses for these regions in particular reflect property damage and business interruption to residential, commercial, industrial, and automobile lines of business, as well as sources of post-event loss amplification (PLA) and leakage of flood losses onto windstorm policies.

Overall, the total insured losses from Ida reflect property damage and business interruption to residential, commercial, automobile, industrial, infrastructure, marine cargo and specie, watercraft, and other speciality lines of business, along with PLA and non-modeled sources of loss.

RMS noted that flood policy take-up is significant in coastal areas in the Mid-Atlantic and Northeast, some of the areas worst affected by floods during Ida have minimal (less than 10 percent) NFIP participation.

RMS expects the majority of onshore insured losses from Ida to be driven by wind, followed by inland flooding, and then storm surge. Additionally, insured wind losses will be driven by residential lines, and insured water losses will be dominated by commercial and industrial lines. Insured losses to infrastructure, watercraft, and marine cargo and specie lines in Ida will be less than $1 billion.

Ida made landfall near Port Fourchon, Louisiana on August 29 as a Category 4 hurricane, before moving northward toward the Tennessee River Valley. It weakened and eventually transitioned to a post-tropical cyclone before impacting the Mid-Atlantic and Northeast regions with torrential rain and flash flooding.

Hurricane Ida was the ninth named storm of the 2021 North Atlantic hurricane season, the fourth hurricane, and the fifth named storm to make landfall in the US this season. Ida was also the fourth hurricane to make landfall in Louisiana since 2020, following Hurricanes’ Laura, Delta, and Zeta. Over two months remain in the 2021 Atlantic hurricane season, which officially ends on November 30.

“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,” said Jeff Waters, senior product manager of RMS North Atlantic Hurricane Models.

Firas Saleh, director of RMS US Inland Flood HD Model, warned that “ 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 $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, Saleh added. “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.”

Rajkiran Vojjala, vice president of model development at RMS, noted: “We expect a sizable portion of the overall insured losses from Ida to be associated with post-event loss amplification. A combination of COVID-19 related impacts, including rising construction costs, labor shortages, and fewer loss inspections could contribute to economic demand surge as repairs are undertaken in the coming months. That, along with prolonged power outages will only lengthen recovery and repair times, all of which may lead to increased overall claim costs in this event.”

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