Depending on which model is used, the damage estimates from Hurricane Harvey rangefrom $15 billion in insured losses to total property damageestimates of $75 billion for flood damage alone. Add in wind and storm surge, and the numbers increaseby another several billion dollars. Bottom line – Hurricane Harveycaused a significant amount of damage and insurers and modelers arestill trying to determine the full scope of the destruction.

Actual numbers will probably not be availablefor months, but some modelers are providing data that allows theirclients to begin planning how to assign their resources todifferent areas. Catastrophe (CAT) teams for multiple insurers havedescended on Houston and other parts of Texas to servicepolicyholders, and many had teams in place before Harvey even madelandfall.

Chubb has CAT teams on the ground in Rockport, CorpusChristi and Houston, where they are seeing a wide range of bothcommercial and residential claims says Chubb’s Bill Turnbull, SVP,North America Property Claims. The company uses a three-prongedcatastrophe approach that includes service centers staffed withknowledgeable professionals 24x7, claims adjusters who are on theground in the impacted areas so they can meet with policyholders attheir properties, and drone technology to assist professionals intheir risk and loss assessments.

To help reduce their loss severity, the company has dispatchedcertified restoration and mitigation specialists to help withboarding up and tarping structures, as well as waterextraction.

The day after the storm hit, Tim Barziza, who leads their teamin Corpus Christi said, “I’m hearing from our team that we are someof the first adjusters on the ground, and it is driving somecommentary by neighbors of our clients, one of whom noted, ‘Wow! Wehaven’t even spoken to our adjuster yet.’”

Related: Harvey's cleanup list: Toxic plumes, dead animals,moldy debris

Houston, Texas - August 27, 2017:Cars submerged from hurricane Harvey in Houston, Texas, USA. Heavyrains from hurricane Harvey caused many flooded areas in Houston.(Photo: Shutterstock)

Model behavior

When it comes to estimating losses, every modeler has a slightlydifferent approach. Karen Clark, president and CEO of KCC saystheir wind and storm surge numbers were based on their hurricanemodels and the company has an accurate record when it comes toestimating wind damage. “The wild card is inland flooding,” sheadds,” because it is difficult to model.”

The company developed a flooding methodology using stream gaugedata, estimates of rivers overtopping and rainfall data, and theycan overlay high resolution elevation data in order to develop anintensity footprint of an area. “It is updated every day based onthe data received, and then improved and refined,” Clarkexplains.

The company also has a detailed database of commercial andresidential property values, as well as auto values for aparticular area, which are used as the basis for their estimates.By using the footprint and the database information on propertyvalues, the modeler can begin to estimate property damage numbers.“We do work off of two sets of assumptions,” Clark continues. “Thefirst is what would the total property damage be to a specific typeof structure? The second is how many of the properties areinsured?”

KCC assumes that a certain proportion of commercial andindustrial properties will be insured for flood damage, as wouldmost automobiles. Their numbers also take into account a certainamount of residential leakage where some damage will be covered byinsurers under wind policies.

KCC estimates $2.5 billion in insured wind damage - $1.4 billionin residential, $.9 billion in commercial/industrial, and $.2billion in auto. Insured storm surge damage is estimated at $.5billion and inland flooding at $12.4 billion – $1.1 billion inresidential, $8.1 billion in commercial/industrial, and $3.2billion for auto. The $15.4 billion estimate does not includedamage covered by the National Flood Insurance Program (NFIP) oruninsured losses. “All storms tend to be unique,” says Clark. “Theamount of rainfall with Harvey was unprecedented.”

Case in point, KCC has started working on damage estimates forHurricane Irma, which is leaving a trail ofdestruction as it wends its way through multiple islands in theeastern Caribbean. “There is a lot of uncertainty with Irma,” saysClark. “We’ll take the projected track and estimate if this is itspath, these could be the losses.”

Their methodology helps them to predict what possible lossescould be and allows clients to determine how to expend theirresources. Real time event modeling also helps insurers estimatehow many claims they will have and what the claim severity could befor a given storm. While it’s not an exact science, it’s prettyclose.

Related: How businesses can minimize the impact of Harvey’sservice interruptions

Hurricane Irma is expected to impact almost the entirestate of Florida when it makes landfall in the U.S.(Photo: Forensic Weather Consultants)

NFIP coverage estimates

Core Logic, a global property information and analytics providerprovided some preliminary residential loss estimates from HurricaneHarvey on August 31 through a press release, and their numbersincluded insured losses from private insurers as well as theNFIP.

Their data analysis estimated residential insured flood lossesat $6.5 billion to $9.5 billion for a 70-county area in Texas andLouisiana. These numbers include inland, flash and storm surgeflooding. Core Logic estimates another $1 billion to $2 billion inwind damage for those areas.

Unfortunately, uninsured flood losses were substantially higherand estimated to be $18 to $27 billion, meaning that approximately70% of the flood damage from Hurricane Harvey will not be coveredby federal or private insurance. Losses insured by the NFIP forstorm surge, inland and flash flooding are estimated to fallbetween $6 and $9 billion.

Financial advisor Morgan Stanley’s numbers were slightly higheraccording to a research update issued on September 1, with totalinsured losses estimated at between $15 and $40 billion, with $5 to$15 billion of that attributed to the NFIP. Wind damage estimatesranged from $2 to $4 billion; commercial flooding was estimated at$5 to $15 billion; and auto damages fell between $3 and $6billion.

Modeler Risk Management Solutions (RMS) estimates overalleconomic losses at $70 to $90 billion, while Moody’s estimate was$75 billion according to the Morgan Stanley report.

Catastrophe modeling firm AIR Worldwide estimates propertylosses from flooding in the $65 to $75 billion range for allproperties, regardless of whether or not they had any insurancecoverage. Wind, flood and storm surge damage were estimated at $10billion ($3 billion from wind and storm surge), but did not includeNFIP losses.

The Association of Claims Professionals (ACP) says analysts areestimating that Hurricane Harvey will cost as much as $60 billionin damage to homes, vehicles, businesses and property. Their memberfirms have thousands of trained professionals who will be goinginto the impacted areas as soon as it is safe to enter.

An estimated 4 million vehicles in Houston were at risk offlooding during Hurricane Harvey. (Photo: J. Moore/AmericanTechnologies)

Vehicle losses

Automotive data firm Black Book says that flooding fromHurricane Harvey has probably damaged more vehicles than any othercatastrophe, estimating that as many as 1 million vehicles wereaffected. Investment banking advisory firm, Evercore ISI, indicatesthat approximately one in seven cars in Houston were damaged by thehurricane.

Susanna Gotsch, an analyst with CCC Information Services Inc.,provides some perspective on the auto losses. In a report detailingHarvey’s potential impact, she explains that Superstorm Sandyresulted in 160,000 auto losses, making it one of the largestnumber of losses in a single event. In contrast, following atorrential rainfall in Louisiana in August 2016 that dumped morethan three times the amount of rain as Hurricane Katrina, more than60,000 homes and 100,000 vehicles were impacted, resulting inbillions of dollars in damage.

The types of vehicles owned in an area can also affect the lossnumbers. The vehicles damaged by Sandy were found to be newer,non-domestic models with an average valuation of $15,000 vs. $9,000for vehicles flooded other major events. Gotsch’s analysis of thevehicles impacted by Harvey estimates their value to be justslightly below those damaged during Sandy.

She says that “in the Houston area as of 2007, there were anestimated 570 vehicles per 1,000 residents. Looking at many of thehardest hit counties to date, there are potentially over 4 millionvehicles at risk of flooding.”

To help provide residents and responders coming into Houston andsurrounding areas with transportation, Enterprise Holdings hastransported more than 4,000 rental cars and trucks into theSoutheast Texas region and plans to bring in an additional 17,000vehicles by the end of September according to a press release.

Related: After the flooding: 6 tips for vehicle owners andbuyers

Early estimates from the analysts at Peel Hunt indicate thatHurricane Irma could be a $131 billion disaster if it continues onits Florida-bound track, based on Llyod's Realistic DisasterScenario. (Photo: Forensic Weather Consultants)

Other types of claims from Hurricane Harvey

Besides the commercial and residential property and auto claims,there will be significant business interruption claims. Impactingthose claims will be: service interruption, contingent businessinterruption and extra expense claims; damage to customers, rentalexpenses and additional services; claims related to ingress andegress and civil authority issues because of restricted access to abusiness; environmental claims because of damage to storage tanksand the pollutants that may have been released; inventory losses;rental income and consequential losses such as spoilage claimsrelated to perishables like food and pharmaceuticalmedications.

According to London-based IHS Markit, which provides informationand analysis to a number of industries, oil production in the Gulfof Mexico is starting to normalize as eight of the 20 refineriesaffected by Harvey have restarted operations and are running closeto normal levels, and all but one of the remaining 12 are beginningrestart procedures. This faster than expected recovery is expectedto have a positive impact on gasoline prices, which rosesubstantially as the effects of Harvey were felt through the supplychain. However, Hurricane Irma could have some impact on theFlorida market depending on which way it travels.

Shipping activity is also almost back to normal as ocean tankersare able to access ports in Corpus Christi to bring in supplies andload up with crude oil exports. Freeport and Galveston ports arealso open. While the Houston shipping channel is open, the port ofHouston is having staffing issues because so many workers wereimpacted by the hurricane.

Now modelers are turning their attention to Hurricane Irma whichhas already decimated the British Virgin Islands, Puerto Rico andthe Dominican Republic before heading towards the Turks and CaicosIslands on its way to Florida. The impacts from both HurricanesHarvey and Irma could be felt by the residents and insurers forseveral years to come.

Related: Irma lashes Caribbean as Florida braces fordestruction