Flooding, supply chain issues drive Hurricane IDA estimates higher
Inland flooding and supply chain disruption are driving up insured loss estimates for Hurricane Ida.
An updated assessment from extreme event modelling firm AIR Worldwide last night said insured losses could be from $20 billion to $30 billion.
AIR now estimates that wind and storm surge losses will range from $17 billion to $25 billion, and private-market insured losses from inland flooding will range from $2.5 billion to $5 billion.
Air said: “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.
“AIR’s losses do not include any estimate of losses from the National Flood Insurance Program, or any losses from offshore assets. The industry loss estimates also reflect an adjustment to account for increased material and other repair costs in the current construction market.”
What was left of the hurricane caused flooding damage and disruption across the Northeast. There was flooding from Pennsylvania to Massachusetts, with New York, New Jersey, and Pennsylvania bearing the brunt of the impact.
The catastrophe modelling company said: “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 per cent higher than September of last year, they remain about 30 per cent 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.
“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.”