Catastrophe modeling firm AIR Worldwide estimates that insurable losses from the rainfall-induced Louisiana floods in August will be between $8.5 billion and $11 billion.

The rainfall lasted about seven days, “resulting in accumulations of around 7.1 trillion gallons in Baton Rouge and the surrounding suburbs, according to reports, reaching upward of 30 inches in some areas,” said Dr. Boyko Dodov, vice president and director of flood modeling at AIR Worldwide.

Twenty parishes were declared major disaster areas, and FEMA issued $1 billion in Federal Disaster Assistance grants to those affected. AIR said the majority of homeowners impacted by the floods reportedly did not have flood insurance because their homes were not in flood zones.

AIR’s insurable loss estimate includes exposures eligible for coverage, regardless of whether they are actually insured, without any application of deductibles or limits. The loss estimates capture residential, commercial and auto 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. These loss estimates are based on AIR’s high-resolution Industry Exposure Database (IED) for the United States and damage ratios estimated from reported flood inundation.

AIR said the range in its 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.

AIR noted that many reinsurance contracts are subject to an hours clause (typically 168 hours for flood events). The catastrophe modeler said it expects the flood to be treated as a single occurrence in Louisiana.

AIR Worldwide is a Verisk Analytics business.

Source: AIR Worldwide

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