The cost of the harm was assessed at 42 billion. The most costly hurricane would be “Katrina” ($ 118 billion) in 2005. Concerning the monetary effect of “Harvey”, it stays indeterminate.
The costs of the damage caused by the storm Harvey , which hit Texas and threatens Louisiana, could be among the five highest ever recorded in the United States, and reach 42 billion, according to models.
Estimates have risen from 30 billion to 42 billion in just a few hours as flooding reaches the neighboring state of Louisiana and measures to contain the waters are inadequate, said Chuck Watson, founder of the modeling agency Enki Research. Most of the operations are currently aimed at evacuating populations and rescuing the victims, but the question of the impact on the economy of Texas, the second largest state of the country in terms of area and population, will quickly become essential. He said,
“If Harvey was a storm like any other, we would probably talk about $ 4 billion in damage,” says Watson. “It would be tragic for the people affected, but we would not talk about the impact on the entire economy”.
But at $ 42 billion, Harvey would rise to hurricane Ike, which had hit Texas and part of the Caribbean and the Caribbean in 2008 ($ 43 billion), and Wilma, which had crushed the northern United States in 2005 (38 billion). The most costly, as indicated by Chuck Watson, is so far Katrina (118 billion dollars) in 2005.
40% of US refining capacity halted
Texas accounts for about 9% of the US gross domestic product, just behind California, which in itself makes it a stronger economy than Canada or South Korea. The investment bank Goldman Sachs estimated Monday that Harvey could remove 0.2 percentage point the rate of growth of the US economy in the third quarter. “But the impact of the hurricane on the entire second quarter is still uncertain,” said analysts at the bank in a note.
“The negative effects could be offset by the increase in business investment and construction activity once the storm is over,” they add.
The Texas coastline surrounding the Gulf of Mexico is home to about one-third of US refining capacity, and important sites like ExxonMobil in Baytown have had to close. According to a study by Barclays Bank, 40% of US refining capacity was shut down, or about to be, on Tuesday.
In addition to energy, the consequences of the disaster will be felt on the industry, including IT, defense and agriculture (livestock in particular). If destruction first slows down economic activity, it is followed by a rebound in activity related to the reconstruction of devastated areas.
Uncertain insurance coverage
But according to the Insurance Information Institute, only 12% of owners in the United States were insured in 2016 against water damage, a rate that reaches 14% in the south of the country. “This is a really critical situation, not only from a weather point of view, but also financially for people,” AFP spokeswoman Loretta Worters says, adding that without government support the victims could be ruined.
She says, however, that for the insurers themselves, the situation is not critical, as the sector currently has a surplus of $ 700 billion and can assume repayment claims.
In the United States, water damage coverage is separate from the multi-risk homeowner’s contract and Chuck Watson recalls that at-risk area maps have not always been updated, “two-thirds of flooded areas are not within those considered at risk.