Hurricane Irma damage could cost US economy $300bn
The cost of Hurricane Irma could rise to as high as $300bn (£227bn), with approximately $2trn worth of property estimated to be in its path.
According to Panmure Gordon analyst Barrie Cornes, the economic impact of the storm, which has already caused $1.44bn worth of damage to infrastructure in the French overseas islands of Saint Martin and Saint Barthelemy, could be around $300bn, with insurance firms looking at a loss of between $100bn and $150bn.
“Damage the roof of a million homes, which is possible in this storm, and the cost racks up pretty quick,” risk modeller Chuck Watson of Enki Research added.
“It’s bad news for the Florida insurance market, which is now dominated by smaller firms since the big national companies pulled out after the rash of storms in the mid 2000s.”
Hurricane Irma barrelled into south west Florida on 10 September, though by then it was downgraded to a Category 2 storm with maximum sustained winds of 110 mph. It was a Category 5 when it struck the Caribbean, killing at least 27 people across the islands.
Some 6.5 million people in Florida were told to leave their homes and some of the state’s motorways came to a standstill as people looked to move away from coastal areas.
Prior to Irma’s arrival, Hurricane Andrews was the worst-ever storm to hit Florida, as it left a trail of destruction including 65 victims and over $32bn of damage. However, at 100 miles in width, the 1992 hurricane was relatively small compared to Irma, which spans across 800 miles and is set to engulf the entire state. Andrew, on the other hand, came from a south easterly direction and was only over Florida for a comparatively short space of time.
Not only are Irma’s size and its path of particular significance for millions of Floridians but also for the insurance market, as the damage inflicted on the state could be unprecedented. Wind and torrential rains have lashed key crops in Florida, including orange groves, which are a staple of the region’s economy.
The Sunshine State is the US’s second-largest producer of orange groves and world’s second-largest producer of orange juice. The price of orange juice futures surged last week, while insurance stocks tumbled.
The damage to the orange crops could also have a longer effect, as it takes a few years for an orange tree production to grow.
“The damage to the orange crop is twofold, both short-term disruption but also to the extent crops are completely destroyed,” Alan Konn, from commodity trading firm Price Asset Management, told MarketWatch.
Meanwhile, the insurance industry is still assessing the damage left by Hurricane Harvey, which hit Texas last month, causing widespread flooding. The storm is expected to have left behind approximately $100bn worth of damage. This is lower than the $176bn inflicted by Hurricane Katrina in 2005, which included $82bn of insured losses.
Some industry experts, however, are more pessimistic.
“We estimated that Hurricane Harvey is to be the costliest weather disaster in US history at $190bn ,or one full percentage point of the US GDP,” said Joel Myers, the founder, president and chairman of forecasting services provider AccuWeather.
“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.”