Delta costs to hit $3.5 billion

The cost of Hurricane Delta may hit more than well over $3 billion with a warning that its combination with Hurricane Laura may deliver complexity in the claim process.

Modelling firm RMS said it estimates total onshore U.S. insured losses from Hurricane Delta to be between US$2. and US$3.5 billion, with the figure taking into account losses to the National Flood Insurance Program (NFIP) of between $200 million and $400 million.

The estimate includes wind, storm surge, and inland flood losses across the impacted states, including Louisiana, Texas, and Mississippi, based on analysis of the RMS North Atlantic Hurricane Models and estimates from the RMS U.S. Inland Flood HD Model. The RMS estimate includes a 15% reduction in insured onshore losses due to the cumulative impacts of Hurricane Laura, which damaged much of the same region six weeks earlier.

“The overlapping nature of Delta and Laura will create a complicated claims management and loss attribution process for the industry,” said Jeff Waters, senior product manager, RMS North Atlantic Hurricane Models. “The modeling teams at RMS assessed the competing impacts of Hurricane Laura on Hurricane Delta losses. We determined that more than half of the impacted postal codes were also impacted by Laura, representing more than 90% of loss in this event.

“While Delta caused higher than expected damage to many structures due to pre-existing damage from Laura, reduced overall exposure-at-risk in the overlapping region after Laura means losses attributed to Delta will end up being lower than if Laura had never happened.”

In Mexico, RMS estimates insured losses from Delta to be less than $500 million.

Additionally, RMS estimates insured losses to offshore platforms, rigs, and pipelines in the Gulf of Mexico to not exceed US$1 billion from wind and wave-driven damages. Offshore losses are based on the October 2020 vintage of the RMS Offshore Platform Industry Exposure Database.

“Unlike Laura, which impacted several deepwater oil and gas platforms earlier in the season, we expect offshore losses from Delta to be driven mainly by shallow water platforms,” said Rajkiran Vojjala, Vice President, Model Development. “The storm shut in oil and gas production in the region up to levels not seen since Hurricanes Katrina, Rita, and Ike. However, Delta’s lower intensity and size while in the Gulf limited the wave heights and consequently, offshore losses are expected to be notably lower than those experienced in the 2005 and 2008 events.”

“As expected, Delta weakened from major hurricane status to a weaker Category 2 storm just before landfall due to a combination of conditions, including high wind shear and cooler sea surface temperatures, both of which restrain a hurricane’s intensity. However, winds strong enough to cause damage expanded in width, increasing the number of coastal properties at risk. Fortunately, Delta rapidly weakened after landfall, which reduced the material wind and water-driven impacts across interior portions of the Gulf states,” explained Pete Dailey, Vice President, Model Development.

Hurricane Delta was the twenty-fifth named storm of the 2020 North Atlantic hurricane season, the ninth hurricane, and the fifth U.S. landfalling hurricane of this very active season. Delta was a record-breaking tenth named storm to make landfall in the contiguous U.S. so far in 2020, and a record-tying fourth named storm of 2020 to make landfall in Louisiana.