GlobeNewswire Inc | Sep 3, 2021 07:16AM EDT

September 03, 2021

BOSTON, Sept. 03, 2021 (GLOBE NEWSWIRE) -- Extreme event modeling firm AIR Worldwide estimates that industry insured losses to onshore property resulting from HurricaneIdas winds and storm surge will range from USD17billion to USD25billion.AIR Worldwide is a Verisk (Nasdaq:VRSK) business.

AIRs modeled insured loss estimates include insured physical damage toproperty (residential, commercial, industrial, auto), both structures andtheir contentsfrom winds, wind-borne debris, storm surge, and the impact of demand surge. The industry loss estimatesalso reflect an adjustment to account for increasedmaterial andother repair costs in the current construction market.Hurricane precipitation-induced flood losses are not included in AIR estimates at this time.

Idatraveled over very warm Gulf waters, including a thick layer of warm water in the Loop Current,and intensified tomake two landfallsin Louisiana, both at Category 4 strength, on August 29.The stormsfirst landfallwasnear Port Fourchon about 60 miles south of New Orleans, with a maximum sustained wind speed of 150 mph;its second landfallwas southwest of Galliano, with a maximum sustained wind speed of 145 mph. Around the time of landfall, the storm was undergoing an eyewall replacement. In practical terms, New Orleans experienced strong winds onthe order of 90to100 mphdue to the largewindfieldand a slow decay of the storm.

The storm surgeIda producedwas along expected lines andgenerallynot as severe as Hurricane Katrinasparticularly in Mississippi and New Orleans (the latter of which wasfullyprotected by the citys levee system)but some areas of southeastern Louisiana with insufficient protection experiencedseverestorm surge during Ida.

According toanalysis by Wood Mackenzie, a sister company in the Verisk family, Hurricane Ida has had a significant impact on Louisiana refinery operations and Gulf of Mexico production, causing a historic U.S. crude supply chain disruption. Utility disruptions caused by lack of power, mobile data services, and water,couldlead to Ida becominga long-tailed event when it comes to claims reporting, payouts,etc.

While New Orleans leveesheld, thecity was not spared Idas wind impacts.Damage was variable given the nature of building inventory in the metro New Orleans area. Areas close to where Ida made landfall such asLaFourcheParish, where Port Fourchon is located, was particularly hardhitwith widespread destruction.Grand Isle Parish, a barrier island, has been declared uninhabitable.Even in townsjust inlandfrom where Ida came ashore, such as Galliano and Houma,wind damage was severe to catastrophic.

In terms of storm surge, most levees held up well, with a few localized failures that have created flooding beyond that from storm surge.Communities to the north,west, south, and eastof the hurricane protection system that surroundsNew Orleans were inundated.Idas storm surge inundated far into the bayous and inhabited areas ofsoutheasternLouisiana, as well as areas near Lake Pontchartrain.Minor near-coastal inundationalsooccurred in Mississippiand Alabama.Key areas flooded by storm surge in Louisiana includePort Fourchon, Grand Isle, Delacroix, Alliance, Lafitte, Jean Lafitte, Barataria, Laplace, Mandeville, Braithwaite, Shell Beach, Galliano, Golden Meadow,andVenetian Isles.Surge inundation depth exceeded10 feet in some places, butseveral tide gauges near maximum storm surge broke,leading to uncertainty in Idas maximum storm surge water level.

Louisiana has a statewide adoption of the Louisiana State Uniform Construction Code. These codes were adopted and have been effective since early 2018. According to these standards, buildings are required to be designedto a prescribed wind speed that variesspatially with higher design wind speeds along the coast and the values decreasing as we move inland.For Port Fourchon and Grand Isle, the design 3-secondgust windspeeds for typical residential and commercial structuresisbetween 160 and 170 mph. For towns such as Golden Meadow, Galliano, Dulac,and the southern portions of Houma, design requirements are between 150and160 mphon 3-secondgust basis. New Orleans, Lockport, and towns alongRoute 90 require buildings to be designed to winds of 140to150 mph3-secondgust.

Commercial buildingswith higher human occupancy requirements and those serving essential functions such as hospitalsare typically subject to more stringent requirements per the IBC, given the risk category in which individual commercial buildings fall.Generally, Hurricane Ida was below the design standards for structures built under these standards. Widespread catastrophic structural failure was therefore not expected.Buildings that are older and predate the adoption of some of these standards can be expected to perform worseand sometimesbecome debris sources that can impact adjacent newer buildings. While adoption of building codes is one aspect, an equally important aspect is their enforcement. While enforcement is good for coastal counties, the same is not true for inland counties. Therefore, asIda trekked through the state and continued to produce damaging winds, damage can be expected to buildings across the entire state.

According to AIR andXactware, a sister company within Verisk, materials costs have gone up significantly in the past year from supply chain disruption in the construction market. Although these costshave moderatedsincetheir peak in Julywhen they were 80% higher than September of last year, they remainabout30% higher.Repair costsare stillup significantly.

Reconstruction costs are more expensive today than they were a year ago. The increase in the total reconstruction cost index means that costs are higher on average nationally; this affects the low- as well as the high-severity events. The difference in magnitude of the impact will come from the mix of construction materials used. For example, minor wind losses are less likely to require repairs that use more expensive inputs such as structural lumber; however, dwellings that are a total loss would require a broader mix of inputs that reflect the higher increases indicated by the total reconstruction index. Therefore,companies should bear these increases in mind and should expect the average claim to be higherbeforeconsidering demand surge.

An additionalsource of uncertaintyrelated to materials cost demand surgeis the cost of diesel fuel, which has been impacted by the shutdown of refineries during Ida; this fuel would be used to transport materials.While some of these facilities were undamaged, theuncertainty around the timing of the restoration of the power grid andlack of electricityin the meantimeis going to keep some of them from coming back online andcontributing to thediesel fuel supply.

One other important aspectof demand surgeto note is that after Hurricane Katrina, about half of the population of New Orleansmoved awayandthe citynever returned to pre Katrinapopulationlevels.Thismass migrationprobably mitigatedeconomicdemand surge, which was not as great as it might have beenafter that storm.

About AIR Worldwide AIR Worldwide (AIR) provides risk modeling solutions that make individuals, businesses, and society more resilient to extreme events. In 1987, AIR Worldwide founded the catastrophe modeling industry and today models the risk from natural catastrophes, terrorism, pandemics, casualty catastrophes, and cyber incidents. Insurance, reinsurance, financial, corporate, and government clients rely on AIRs advanced science, software, and consulting services for catastrophe risk management, insurance-linked securities, longevity modeling, site-specific engineering analyses, and agricultural risk management. AIR Worldwide, a Verisk (Nasdaq:VRSK) business, is headquartered in Boston, with additional offices in North America, Europe, and Asia. For more information, please visit www.air-worldwide.com.

Kevin LongAIR Worldwide01-617-267-6645klong@air-worldwide.com