Harvey damage to cost tens of billions of dollars

Hurricane Harvey likely to be one of the costliest natural disasters on record for US economy, according to Aon report

Harvey damage to minimally cost US economy tens of billions of dollars

Impact Forecasting, Aon Benfield’s catastrophe model development team, launched the latest edition of its monthly Global Catastrophe Recap report, which evaluates the impact of the natural disaster events that occurred worldwide during August 2017. Aon Benfield is the global reinsurance intermediary and capital advisor of Aon plc (NYSE:AON).

The report reveals that Hurricane Harvey came ashore in Texas on August 25 to become the first major hurricane (a storm rated as either Category 3, 4 or 5) to make landfall in the United States since Hurricane Wilma in 2005. Heavy rain continued until August 31 bringing record-breaking rainfall to some areas. Catastrophic flooding ensued across a swath of eastern Texas and southwestern Louisiana, as more than 60 people were confirmed dead and dozens more were injured. Additional impacts due to severe thunderstorms and flash floods were noted across the Gulf States and Mississippi Valley.

Total economic losses were estimated to minimally reach the tens of billions (USD), ensuring that Harvey is likely to become one of the costliest natural disasters on record in the U.S. Preliminary published reports suggest that insured losses – including those paid by private industry and the U.S. National Flood Insurance Program – were likely to well exceed USD10 billion.

Elsewhere, Typhoon Hato and Tropical Storm Pakhar both made landfall in China’s Guangdong province within one week of each other, causing considerable damage and loss of life in multiple provinces as well as Macau and Hong Kong. Economic losses from Hato alone were minimally estimated at USD3.0 billion, while combined insured losses from both storms in Guangdong were estimated at USD535 million.

Additionally, Typhoon Noru and Hurricane Franklin impacted southern Japan and Mexico respectively during August.

Steve Bowen, Impact Forecasting director and meteorologist, said: “Hurricane Harvey’s landfall in the United States officially put an end to the 11-year major hurricane drought. The impacts from the cyclone were far-reaching, and the scope of flood damage in Houston – the nation’s fourth largest city – was historic. Given the anticipated costs from direct damage and business interruption, it is expected that Harvey will eventually be recorded as one of the costliest natural disasters on record in the U.S. Harvey served as a challenging reminder of how catastrophic hurricane events can be, and with September being the peak of the Atlantic Hurricane Season, the risk of further storms remains high.”

Further natural hazard events to have occurred worldwide in August include:

  • More than 1,300 people were killed across South Asia due to extensive monsoonal flooding and landslides during August. Throughout India, Bangladesh, and Nepal, tens of millions of people were affected as approximately one million homes were damaged or destroyed. Extensive damage to agriculture and infrastructure was also endured in northeastern India, southern and eastern Nepal, and northern Bangladesh.
  • Multiple rounds of flooding impacted several Chinese provinces claiming at least 100 lives and generating aggregated economic losses in excess of USD1.2 billion.
  • Floods in northern Vietnam claimed 40 lives and caused losses of USD88 million.
  • Torrential rainfall over portions of Africa during August led to at least two significant landslides that claimed an estimated 1,250 lives. The largest of these occurred in Sierra Leone on August 14 where the death toll in Freetown was estimated at approximately 1,050. Additional flood events were reported in Russia’s Far East, Yemen, Iran, the United States (Florida), and Europe (The Alps) during August.
  • Several rounds of severe weather including at least two derechos impacted multiple central European countries through the middle part of August. Widespread property, agricultural, and forestry damage was reported from Poland, the Czech Republic, Slovakia, Germany, Switzerland, and Austria. Both economic and insured losses were expected to reach well into the hundreds of millions (EUR).
  • Multiple severe weather outbreaks were additionally noted in the United States and China.
  • On August 8, a magnitude-6.5 earthquake struck China’s Sichuan province, damaging 72,500 homes.



How the Knysna Fire Will Affect Insurers – and the Uninsured

The Knysna fire and Cape Storm proved devastating for thousands of residents, with many homes being destroyed by the blaze.The Western Cape community was quick to respond, with companies and residents donating to an emergency relief fund.

Insurers are also expecting an influx of claims for destroyed valuables and property.

But this is one of the largest natural disasters in South Africa recently. So how does destruction of this scale affect insurers and ordinary people?

Implications for Insurers

Many insurers have assured that claims will be paid out speedily and without hesitation. However, the sheer volume of claims are sure to affect insurance companies – especially smaller ones.

“With nearly 10 000 residents evacuated and homes, schools, structures, and power and communication lines destroyed, the impact on short-term insurance claims is likely to be substantial,” Old Mutual says on their site.

The insurer says that this could result in delays in the claims process. This, however, would impact residents negatively as they would have to dip into their savings.

How well smaller insurers will be able to handle the impact of the huge number of claims is in question.

Richard Hasson, an analyst at Electus Fund Managers, said in a report that the profit of these companies will be under pressure.

“In a weak economic environment, such as low gross domestic product growth and increasing unemployment, claims typically pick up, which will not be good for them. The recent fires and storms will affect the companies,” he said.

Some insurance companies, however, will be able to fall back on reinsurance, according to Business Day. This is essentially insurance for insurers, which can help limit losses following disasters.

What has to be kept in mind is that claims will not only be coming from house owners but also business owners.

According to the Western Cape government, around 30 tourism establishments were affected by the fires.

Even larger insurance companies will see losses, but they will be able to contain them.

First appeared in Compare Guru

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