AIR’s modeled insured loss estimates include insured physical damage to property (residential, commercial, industrial, auto), both structures and their contents from winds, wind-borne debris, storm surge, and the impact of demand surge. The industry loss estimates also reflect an adjustment to account for increased material and other repair costs in the current construction market. Hurricane precipitation-induced flood losses are not included in AIR estimates at this time.
Ida traveled over very warm Gulf waters, including a thick layer of warm water in the Loop Current, and intensified to make two landfalls in Louisiana, both at Category 4 strength, on August 29. The storm’s first landfall was near Port Fourchon about 60 miles south of New Orleans, with a maximum sustained wind speed of 150 mph; its second landfall was 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 on the order of 90 to 100 mph due to the large windfield and a slow decay of the storm.
The storm surge Ida produced was along expected lines and generally not as severe as Hurricane Katrina’s—particularly in Mississippi and New Orleans (the latter of which was fully protected by the city’s levee system)—but some areas of southeastern Louisiana with insufficient protection experienced severe storm surge during Ida.
According to analysis 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, could lead to Ida becoming a long-tailed event when it comes to claims reporting, payouts, etc.
While New Orleans’ levees held, the city was not spared Ida’s 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 as LaFourche Parish, where Port Fourchon is located, was particularly hard hit with widespread destruction. Grand Isle Parish, a barrier island, has been declared uninhabitable. Even in towns just inland from 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 east of the hurricane protection system that surrounds New Orleans were inundated. Ida’s storm surge inundated far into the bayous and inhabited areas of southeastern Louisiana, as well as areas near Lake Pontchartrain. Minor near-coastal inundation also occurred in Mississippi and Alabama. Key areas flooded by storm surge in Louisiana include Port Fourchon, Grand Isle, Delacroix, Alliance, Lafitte, Jean Lafitte, Barataria, Laplace, Mandeville, Braithwaite, Shell Beach, Galliano, Golden Meadow, and Venetian Isles. Surge inundation depth exceeded 10 feet in some places, but several tide gauges near maximum storm surge broke, leading to uncertainty in Ida’s 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 designed to a prescribed wind speed that varies spatially 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-second gust wind speeds for typical residential and commercial structures is between 160 and 170 mph. For towns such as Golden Meadow, Galliano, Dulac, and the southern portions of Houma, design requirements are between 150 and 160 mph on 3-second gust basis. New Orleans, Lockport, and towns along Route 90 require buildings to be designed to winds of 140 to 150 mph 3-second gust.
Commercial buildings with higher human occupancy requirements and those serving essential functions such as hospitals are 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 worse and sometimes become 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, as Ida trekked through the state and continued to produce damaging winds, damage can be expected to buildings across the entire state.
According to AIR and Xactware®, 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 costs have moderated since their peak in July when they were 80% higher than September of last year, they remain about 30% higher. Repair costs are still up 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 higher before considering demand surge.
An additional source of uncertainty related to materials cost demand surge is 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, the uncertainty around the timing of the restoration of the power grid and lack of electricity in the meantime is going to keep some of them from coming back online and contributing to the diesel fuel supply.
One other important aspect of demand surge to note is that after Hurricane Katrina, about half of the population of New Orleans moved away and the city never returned to pre Katrina population levels. This mass migration probably mitigated economic demand surge, which was not as great as it might have been after that storm.