Louisiana floods to cost U.S. economy between US$10-15 billion: Aon Benfield’s Impact Forecasting

The recent flooding in Louisiana is expected to cost the economy of the United States between US$10 billion and US$15 billion, with public and private insured losses expected in the low-digit single billions, according to Aon Benfield’s latest Global Catastrophe Recap report.

Terry Brewer, left, and Timothy Harris pile up debris outside a flooded auto parts store in Albany, La. on Wednesday, Aug 17, 2016. The U.S. Small Business Administration plans to open several south Louisiana locations to help businesses damaged by record flooding. Louisiana’s economic development office is encouraging business owners to register for federal disaster aid and to look at other available support services at www.OpportunityLouisiana.com. (AP Photo/Kevin McGill)

Released on Thursday, the report by Aon Benfield’s catastrophe model development team, Impact Forecasting, evaluates the impact of natural disaster events that occurred worldwide during August.

Of note was the days of extreme rainfall across parts of the U.S. Gulf Coast and Midwest that caused catastrophic flood damage in several communities during the month and killed at least 13 people. Public and private insured losses “were expected to be in the low-digit single billions (USD), due to the regionally low participation in the National Flood Insurance Program (NFIP), which has resulted in more than 80% of damaged homes not having flood insurance,” Impact Forecasting said in a press release.

States of emergencies were declared in both Louisiana and Mississippi as several feet of floodwaters left homes, businesses, vehicles and agricultural land almost entirely submerged. As many as 110,000 homes and 100,000 vehicles were damaged or inundated in Louisiana alone, the report noted.

In Italy, a severe magnitude-6.2 earthquake struck central Italy, killing 296 people and causing catastrophic damage in the hardest-hit towns of Amatrice, Accumoli, Pescara del Tronto, Arquata del Tronto and Posta. Total economic damage was estimated to reach into the billions of dollars (USD); however, given very low insurance penetration, the insured loss portion was expected to be a fraction of the overall cost.

“August was an active month for global natural disasters, led by two major catastrophes: historic flooding in Louisiana and a major earthquake in central Italy,” said Steve Bowen, Impact Forecasting director and meteorologist, in the release. “While both these events were multi-billion dollar disasters, unfortunately, the vast majority of the losses are likely to be uninsured, further exposing the reality that certain perils remain vastly underinsured regardless of region. Indeed, as we enter the final third of 2016, roughly 75 per cent of the year’s disaster losses have been uninsured.”

In Canada, powerful thunderstorms impacted parts of Alberta, Saskatchewan, Manitoba and Ontario on Aug. 3 to 4. There were at least three confirmed tornado touchdowns, one of which caused structural damage in Baldur, Man., the report noted. Up to ping pong ball-size hail damaged portions of Saskatchewan, while there were widespread reports of downed trees and power lines as the result of damaging wind gusts in all of the affected provinces. Structural damage to properties was also reported in Glenboro, Man. While there were no fatalities, hundreds of structures were affected, with economic loss in the “10s of millions” of U.S. dollars.

Further natural disaster events in August included:

• In India, continued flooding brought the death toll for the season to 600 as more than 100,000 homes and other structures were destroyed. Total economic losses were estimated at US$462 million;
• Hurricane Earl made separate landfalls in Belize and Mexico after first tracking through the Caribbean Sea, killing at least 67 people. Total economic losses were estimated at US$250 million, including in Mexico (US$132 million) and Belize (US$110 million);
• Wildfires burning in southern France, mainland Portugal and on the islands of Madeira (Portugal) and La Palma (Spain) claimed at least five lives. In Portugal alone, the fires charred 115,000 hectares (284,000 acres) of land as total economic damage was listed at US$226 million;
• Major California wildfires prompted evacuations and destroyed hundreds of homes. Economic losses were forecast at above US$100 million; the cost to fight the fires was more than US$50 million alone; and
• Severe summer drought conditions, which began in June, intensified across parts of northern China during the month of August. The Ministry of Civil Affairs cited that more than 3.1 million hectares of cropland was damaged and more than 1.3 million livestock suffered from water shortages. Total economic losses were listed at US$1.6 billion.