Economic Cost of Hurricanes Harvey and Irma Estimated at $290 Billion

Posted: Sep 12, 2017 9:07 PM

The combined economic cost of Hurricanes Harvey and Irma is expected to hit $290 billion and cause the most destructive and costly season of storms since recordkeeping began, according to AccuWeather.

The monster storms mark the first time that two Category 4 or higher hurricanes have struck the U.S. mainland in the same year. Still unknown is the ultimate track of Hurricane Jose, a Category 1 storm 700 miles east of Florida around midday Tuesday, Sept. 12, with maximum sustained winds of 75 miles per hour.

Fears that Jose could hit the United States to cause a triple-whammy of hurricane damage to the mainland and possibly the Bahamas remain, especially if it gains strength and loops westward by this weekend. So far, most computer models show Hurricane Jose remaining at sea and not moving onshore.

The much-feared direct hit to Miami failed to materialize once Hurricane Irma took a westward turn and moved up the less populous west coast of Florida. Hurricane damage forecasters have raised concerns for decades about the potential devastation to lives and property if a Category 5 hurricane, such as Irma, struck Florida’s largest city with its full force.

Reinsurers that carry a significantly higher share of the risk in Florida than most other states due to its propensity to sustain storm damage actually rose in share price after Hurricane Irma caused less destruction that initially feared by forecasters. The share prices of big reinsurers such Swiss Re (SREN: VX) and Munich Re (BIT: MUV2), the largest reinsurer in the world, rose, as did Florida’s largest residential property and casualty insurer, Universal Insurance Holdings Inc. (NYSE: UVE).

AccuWeather estimates that Hurricane Irma will cause roughly $100 million in economic damage, roughly 0.5 of a percentage point of U.S. gross domestic product (GDP) of $19 trillion, compared to $190 billion from the less powerful Hurricane Harvey, which tore through Houston, America’s fourth largest city. The economic damage includes both insured and uninsured losses.

The avoidance of a direct hit with Hurricane Irma’s full force on a big city in Florida significantly reduced potential losses, especially since the storm was larger and sustained intensity for the longest time of any hurricane or typhoon since the “satellite era began,” said Dr. Joel Myers, AccuWeather’s founder, president and chairman.

Hurricane Irma showed “great staying power,” even after ripping through several islands in the Caribbean and striking the coast of Cuba, Myers said.

Such storms cause extremely hazardous conditions, including fallen trees, flying objects and downed power lines, which carry the potential for electrocution, broken window glass and damage to roofs and other structures. Storm surge can be another major threat.

The passage of Hurricane Irma, now a tropical depression dosing the middle of the country with rain, is being followed by wind that could damage structures and trees that withstood earlier wind and rain, but have been weakened since, Myers said.

Hurricane Irma caused damage from wind, flooding from heavy rain and damage from the sea in different places in Florida. Many places more than 25-50 miles inland faced wind gusts of more than 100 miles per hour before the storm weakened.

“We estimated that Hurricane Harvey is to be the costliest weather disaster in U.S. history at $190 billion or one full percentage point of the GDP. Together, AccuWeather predicts these two disasters amount to 1.5 of a percentage point of the GDP, which will be about equal to the “natural growth of the economy” from mid-August through the end of the fourth quarter,” Myers added.

Economic costs are incurred by, but not limited to, the following:

  • Disruptions to businesses
  • Increased unemployment rates for weeks, and possibly months in some places
  • Damage to transportation, infrastructure
  • Crop loss, including cotton crops and 25 percent of orange crop, which will impact the cost of consumables for all Americans
  • Increased gasoline, heating oil and jet fuel prices impacting all Americans
  • Damage to homes, cars, furniture, antiques, jewelry and other valuables
  • Loss of valuable papers and cherished belongings such as photos

“Some of the losses will be covered by insurance, some will not, so the losses will be felt in a variety of ways by millions of people. Many millions of people have already been evacuated, so their lives have already been affected and they have incurred costs of one sort or another,” Myers said.

“AccuWeather takes our responsibility of providing the most accurate forecasts and warnings and the impact on people and business very seriously. This is a solemn responsibility that we have and our people are working extremely hard and with great intensity to make sure that all the people we reach can depend on our info for the utmost in reliability so they can make the right decisions during these stressful times. We also take great pride in the fact that we were the first to warn of the magnitude of both Harvey and Irma and have been out ahead of other sources on both so people know they can get the latest and best info from the AccuWeather app and our website. We thank those who put trust in AccuWeather forecasts and warnings and are gratified by the countless notes of thanks we are receiving from our customers and users in the affected areas,” Myers said.

Below is a chart of the costliest disasters through last year for comparison.

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