With Insured Losses Estimated at $8.5-$11B, Louisiana Looks to Recovery

By MELINDA DESLATTE | October 3, 2016

Catastrophe modeling firm AIR Worldwide estimates that industry ground-up insurable losses—which include exposures eligible for coverage (regardless of whether they are actually insured) without any application of deductibles or limits—from the flooding in Louisiana caused by excessive rainfall during August 2016 will be between $8.5 billion and $11 billion. AIR Worldwide is a Verisk Analytics business.

“Extreme rainfall-induced flash flooding and river flooding on the floodplain have wreaked havoc in Louisiana, breaking records and damaging property throughout many parishes,” said Dr. Boyko Dodov, vice president and director of flood modeling at AIR Worldwide. “Beginning around August 10, 2016, rainfall continued almost perpetually for approximately seven days, resulting in accumulations of around 7.1 trillion gallons in Baton Rouge and the surrounding suburbs, according to reports, reaching upwards of 30 inches in some areas.”

August 2016 is now the wettest month on record for Baton Rouge since 1907. A NOAA rapid-response study indicates that a rainfall event such as this is expected to occur at least 40 percent more often than it was in our preindustrial past.

Historic crests at 12 real-time river gauging stations of the USGS in Louisiana were surpassed due to the rainfall event, including on the Amite, Comite, Tickfaw, and Tangipahoa rivers. A report from the Baton Rouge Area Chamber indicates more than 145,000 residences—housing upwards of 359,000 people—were in flood-affected areas; almost 12,000 businesses—which together employ more than 136,000 people—are in areas identified as flood-affected.

The August flooding ravaged south Louisiana, causing more than $8.7 billion in destruction and killing 13 in the nation’s worst disaster since Superstorm Sandy struck the East Coast in 2012. State officials estimate 130,000 homes were damaged and more than 5 million cubic yards of debris – enough to fill 350,000 dump trucks – will be collected.

The federal government declared 20 parishes major disaster areas. FEMA issued $1 billion in Federal Disaster Assistance grants to those affected, including National Flood Insurance Program (NFIP) policy holders who have received more than $247 million to repair or rebuild damaged properties; more than 63,000 families have sought FEMA assistance for housing. The majority of homeowners impacted by the floods reportedly did not have flood insurance because their homes were not in flood zones, thus the financial burden of recovery is inhibiting progress; around 850 people are said to still be in shelters.

The loss estimates include residential, commercial, and automobile losses from inland flood both on and off the floodplain based on 100 simulated event scenarios that reflect uncertainty in precipitation observations and modeled levee failures. Loss estimates were derived based on AIR’s high-resolution Industry Exposure Database (IED) for the United States and damage ratios estimated from reported flood inundation.

The range in loss estimates also reflects uncertainty in the payment of additional living expenses resulting from relocation, time spent in secondary housing, lost wages, loss of electricity, and damage to contents. Please note that total economic losses are expected to be higher than industry insurable loss estimates.

This aerial image shows flooded areas of North Baton Rouge, La., Saturday, Aug. 13, 2016. Louisiana Gov. John Bel Edwards says more than 1,000 people in south Louisiana have been rescued from homes, vehicles and even clinging to trees as a slow-moving storm hammers the state with flooding. (Patrick Dennis/The Advocate via AP)

This aerial image shows flooded areas of North Baton Rouge, La., Saturday, Aug. 13, 2016. Louisiana Gov. John Bel Edwards says more than 1,000 people in south Louisiana have been rescued from homes, vehicles and even clinging to trees as a slow-moving storm hammers the state with flooding. (Patrick Dennis/The Advocate via AP)

The modeled hazard intensities reflect the maximum estimated river flows and maximum excess runoff intensities during the event from August 8–19, 2016. Note that many reinsurance contracts are subject to an hours clause (typically 168 hours for flood events). Given the duration of this event, AIR expects the flood to be treated as a single occurrence in Louisiana.

According to Fitch Ratings, last month’s flood damage could stress the state’s narrow cash balance.

Focus Turns to Recovery

Gov. John Bel Edwards charged members of his new flood recovery planning group Wednesday to be bold and innovative in their response to the mid-August flooding and to “devise a plan to restore our great state.”

The Democratic governor spoke last week as the Restore Louisiana Task Force held its first meeting, in anticipation Louisiana could get a more than $400 million share of disaster recovery aid up for debate in Congress – and as much as $2 billion more by December.

“In a very real way, thousands and thousands of our fellow Louisianans have had their lives turned upside down,” Edwards said. “What we have to do as a task force is figure out a way to put people’s lives right-size up again, as soon as possible.”

As he spoke, Congress was still working on a budget deal that included flood aid for Louisiana and other states. The U.S. Senate passed the bill, and it was expected to also win U.S. House support. Edwards said Louisiana was estimated to get more than $400 million in block grant money through the legislation.

According to Fitch, the state currently estimates its net direct operating expenses related to the floods (after FEMA match aid) to be $81 million. Gov. Edwards is asking for $2.8 billion total, hoping Congress will provide additional disaster aid when it returns to work after the November election.

“I don’t want you all to focus so much on what’s going on in Congress. I want you all to focus on what we’re going to do for the people of Louisiana, and the congressional delegation is going to make sure we get the assistance that we need,” Edwards said.

That block grant aid will be the focus of the task force’s rebuilding plans. The group includes economic development officials, local government leaders, state lawmakers and community representatives.

While the money remained uncertain, Edwards urged the group to work quickly on devising proposals for spending whatever aid may be received.

He said that would help members of Louisiana’s congressional delegation make the state’s case to their colleagues before the end of year that the money will be spent wisely, including on making communities more resilient.

“We have to make sure that the federal government understands that this is an investment in our future,” he said.

“The climatologists are telling us 7 trillion gallons of rain fell in 48 hours,” Edwards said. To put that in perspective, he explained: “It takes the Mississippi River 18 days to discharge that much water into the Gulf of Mexico.”

Combined with flooding that struck north Louisiana in March and damaged another 29,000 homes, 56 of the state’s 64 parishes have been hit with destruction from water.

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