Texas Hurricane Patricia Losses Could Be Billions; Mexico Spared

Damage from Patricia, the strongest hurricane ever measured in the Western Hemisphere, may cost the U.S. billions due to floods after the storm spared the largest cities in Mexico.

Flooding in Texas may lead to more than $3 billion in losses, though it’s too early to project the extent of damages, according to Chuck Watson, director of research and development at Kinetic Analysis Corp. Losses in Mexico are likely to be less than $2 billion, he said.

Most of the costs in Texas will be for infrastructure such as roads and bridges, and the U.S. government may cover many of the expenses through the National Flood Insurance Program, Watson said. Homeowners and commercial businesses including malls and industrial companies are likely to suffer damages, said Erik Nikodem, president of property in the Americas at American International Group Inc.

“Mexico just had an incredible piece of luck,” Watson said. “It was remarkable” that the hurricane’s eye missed Puerto Vallarta and Manzanillo. “If the storm was 20 to 30 miles (32 to 48 kilometers) one way or another it would be catastrophic for either of those two cities.”

Update: On Sunday, catastrophe modeling firm AIR Worldwide issued a statement estimating that insured losses to onshore properties in Mexico from Hurricane Patricia would not exceed $200 million.

In Mexico, about $500 million of the losses may be insured, Watson said. The total economic cost could have easily been more than $10 billion had the major cities been struck, he said. Fishing villages and homes were damaged, Nikodem said, and there still may be more destruction from mudslides, which the U.S. National Weather Service warned could be life-threatening. Agriculture could suffer damages in both Mexico and Texas.

In the U.S., heavy rains pounded Houston, where roadways and vehicles were under water and flash flooding derailed a freight train north of Corsicana, according to Risk Management Solutions. More than 10 million people in Texas and Louisiana are under flash-flood watches, the firm said in an update on its website.