Commercial and industrial flood losses to drive Ida’s northeast insured damage

Commercial and industrial flood losses in Pennsylvania, New Jersey and New York represent the majority of AIR Worldwide’s estimated $2.5bn to $5bn inland flooding insured loss impact from Hurricane Ida, according to Hemant Chowdhary, assistant vice president in the modelling firm’s research group.

Chowdhary told The Insurer low take-up rates meant residential accounted for a minimal amount of the total, with automobile losses the second biggest driver of flood claims.

The modelling firm said it estimated losses to automobiles from the storm at between $1bn and $2bn. This range was largely driven by Louisiana with a “significant contribution” from the northeast.

Chowdhary said the inland flooding range included all Ida’s impacts – not just the northeast states – but added that the “majority of losses” were likely incurred in Pennsylvania, New Jersey and New York

He said uncertainties around the loss range include precipitation observation, the ability of drainage systems to cope with the flooding, the duration for which operations will be closed at affected businesses, as well as ongoing concerns around the supply and cost of labour and materials.

AIR was the second modelling firm to provide a public estimate of the expected impacts of Ida’s inland flooding. 

CoreLogic had earlier estimated Ida caused $5bn to $8bn of insured flood losses to northeast residential and commercial properties, adding to the firm’s $14bn to $21bn estimate of insured wind and flood losses in Louisiana, Mississippi and Alabama. 

AIR’s estimate of inland flooding claims brought its total expected insured loss estimate from Ida to between $20bn and $30bn. 

While this remains below the $25bn to $35bn estimate provided by rival modelling firm RMS, there remain several disparities between the two estimates with RMS including National Flood Insurance Program and offshore losses. 

These two factors add up to $5.5bn to the top end of the RMS range, which does not include the storm’s flooding impacts in northeastern states. 

Jeff Waters, senior product manager at RMS, told The Insurer New Orleans accounted for less than 15 percent of its estimated losses. As previously reported by this publication, New Orleans represented roughly 30 percent of AIR’s earlier loss estimate of $17bn to $25bn. 

Amid uncertainty over whether Ida will represent one or two insured loss events, Waters said it was too early to know how much of an impact loss attribution may have on the total estimate for Ida. 

The modelling firm has previously warned of substantial specialty lines losses from the event driven by the widespread power outages which hit Louisiana as a result of Ida. 

“Many high-valued specialty risks in the region such as refineries, chemical processing plants and manufacturing facilities are dependent on the power grid,” he said. 

“Most have backup power for short-term needs but extended power outage will certainly delay restart operations. Thus, prolonged power outages may lead to increased losses due to extended business interruption for specialty lines. It may also cause losses from spoilage of perishable goods.”