Hurricane repair costs above average at onset of 2005 hurricane season

Elevated labor and material costs resulting from last year’s hurricanes are likely to continue through the 2005 season, according to Risk Management Solutions (RMS). By tracking demand surge through analysis of its insurance claims data from the 2004 storms, RMS noted that as of May 2005 costs remained 20% to 40% above average. Results indicate that insured and economic losses will escalate when triggered by even a modest event, particularly in the southeastern U.S.
During the 2004 hurricane season when Florida and other southeastern states experienced four hurricanes within 37 days resulting in over 2 million claims, demand surge was high as the damaged homes were required similar construction and repairs leading to a surge in demand for materials and labor. Pre-existing high prices for plywood due to reconstruction work in Iraq and a reduced supply of steel and cement resulting from a worldwide construction boom, adds further stress to the situation.
“Although construction material costs are up 5%-10% nationwide, the increase in labor costs has outpaced this by a significant margin in Florida and Alabama,” Phil LeGrone, claims research director for RMS, says. “Due to the sustained escalation of labor costs in these states, if a hurricane makes landfall in the southeastern U.S. this year, its economic impact will be as if it were the fifth event in the 2004 season.”
RMS will monitor baseline demand surge conditions in hurricane states throughout the 2005 season enabling clients to assess the potential impacts of hurricanes in 2005 based on antecedent conditions and the geographic area impacted.