Most Colorado flood losses probably not insured while economic losses could exceed US$2 billion: EQECAT

Economic damages from floods in Colorado will exceed US$2 billion but the most losses will not be insured due to exclusions in basic homeowners’ policies, predicts catastrophe modelling software maker EQECAT Inc.

Several people have died as a result of the floods, which have damaged or destroyed at least 19,000 homes.

The heavy rains, flash floods and mudslides have affected 17 counties containing about 80% of Colorado’s population, Oakland, Calif.-based EQECAT noted in a CatWatch report published Thursday. The United States Census Bureau estimated the state’s population at about 5.2 million in 2012.

“Unlike many recent hurricane and tropical storm catastrophes along the U.S. East Coast, the losses from the Colorado floods are expected to be largely uninsured due to exclusions in the basic homeowners insurance policy,” EQECAT noted.

“The U.S. National Flood Insurance Program (NFIP) was established to provide flood insurance and is used by homeowners to establish flood insurance for properties that are within defined flood zones (usually denoted as 100-year flood zones) as a part of their mortgage. Most of the areas impacted by the recent Colorado floods are not within defined flood zones.”

Aon Benfield earlier reported that the City of Boulder, about 40 kilometres northwest of Denver, registered its wettest ever 24-hour period, after 231 mm of rain fell between 6:00 pm Sept. 11 and 6:00 p.m. Sept. 12.

Three days later, the Federal Emergency Management Agency (FEMA) announced that President Barack Obama issued a major disaster declaration for Boulder County. That declaration means that federal assistance is available to individuals for temporary housing and home repairs, low-cost loans to cover uninsured property losses, and other programs to help individuals and business owners.

AIR Worldwide reported earlier that about 70% of residential construction in the affected area is wood, with an estimated 40% of homes having basements, while in Boulder County, codes and ordinances prohibit or limit building on floodplains.

In its CatWatch published Thursday, EQECAT said it expects losses to commercial and government properties and related expenses will total around US$1 billion.

“Closed roads and necessary detours will add additional business and employment costs,” EQECAT stated. “Preliminary economic cost estimates of the Colorado floods do not necessarily correspond to the final restoration costs, because not all damaged assets are repaired, especially at the consumer level.”

In total, EQECAT reported about 1,500 homes have been destroyed, an additional 17,500 homes have been damaged by rising waters and more than 10,000 people have been displaced from their homes. 

Both the Colorado National Guard and regular army units from Fort Carlson (near Colorado Springs) were sent in to rescue people. On Sept. 13, several Guardsmen became stranded while helping to evacuate the Town of Lyons, which had no safe way in or out because water had flowed over the tops of at least five dams.

Eventually, waters in Lyons rose high enough that the military’s 2.5-ton Light Medium Tactical Vehicles were unable to ford it. Soldiers and airmen of the Colorado National Guard were using UH-60 Black Hawk and LUH-72 Lakota helicopters to rescue civilians while aviation units with the U.S. Army’s 4th Infantry Division used Black Hawk and Chinook choppers.

“A total of 555 troops, 20 helicopters, two ground search-and-rescue teams, one search-and-extraction team, one engineering team and 53 traffic-control points” were operational as of the afternoon of September 19, according to a Colorado National Guard press release. “A team of Colorado National Guard civil and structural engineers is now supporting the Colorado Department of Transportation (in assessing) the safety of roads and bridges in the affected area.”

EQECAT noted the 17 affected counties have about 80% of Colorado’s total annual gross domestic product of about US$240 billion. The GDP of those counties (US$190 billion) “is approximately 5% ($190 billion divided by $4 trillion) of the GDP affected by Superstorm Sandy,” EQECAT noted, and therefore “reasonable estimate of economic damages from” the Colorado floods is 5% of the damage from Sandy, or US$2.5 billion.

“The Rocky Mountains in Colorado are known for flash flood risk,” according to the CatWatch. “The confluence of steep canyons, which concentrate rainwater run-off, and meteorological conditions conducive to heavy rainfall, produce a measurable risk of flooding along the entire Rocky Mountain range.”

Aon Benfield, the reinsurance intermediary unit of London-based Aon plc, reported earlier that 312mm of rain fell in Boulder in a four-day period ending Sept. 12, more than Boulder had experienced in any month since 1897.

At least 40 buildings on the campus of the University of Colorado, or 25% of the school’s facilities, were damaged due to water seeping into basements and lower floors, Aon Benfield stated at the time.