As the flooding from Hurricane Harvey continues to engulf southeast Texas, Moody’s Analytics has revised its economic cost projection for the disaster in light of additional categories of damage since its initial estimate of between $51bn and $75bn.
Moody’s has said that Harvey could drive an overall loss similar to, or exceeding that caused by Superstorm Sandy in 2012, potentially making it the second most costly natural disaster of the last thirty years.
The revised projection includes $30bn to $40bn in property damages, $10bn to $15bn in business losses and $5bn to $10bn in infrastructures impacts, Moody's analyst Adam Kamin said in a brief report.
Additionally, he said that lost business output could add a further $6bn to $10bn, in light of the severity of the storm and subsequent flooding. The severity of the flooding means it will take some time for things to return to a more normal state in Texas, with power outages and damages making it difficult for firms to resume business.
"The long-term economic damage associated with Harvey remains likely to be concentrated in the residential market," Kamin said.
There has typically been a lack of flood insurance take-up by homeowners, with a small proportion in the Houston area holding coverage from the National Flood Insurance Program (NFIP).
Moody’s explained that while damaged roads and bridges will be repaired and firms whose assets were damaged can rely on an insurance claim for rebuilding purposes, a lack of flood insurance for homeowners will prevent the type of full-scale reconstruction effort that might otherwise be expected.
“With the storm threatening to disrupt Louisiana as well, cost estimates may well rise further. If that happens, Harvey could potentially overtake such events as Hurricane Andrew and the Northridge Earthquake of 1994 in terms of total losses as a share of GDP,” Moody’s warned.
Sandy caused about $70bn in economic losses in 2012, mostly from its sweep into the New York metropolitan area at the end of October, Moody's has estimated. But other estimates put the storm's costs higher, some at as much as $80bn.
While Kamin did not provide an estimate of insured losses, a number of cat modelling firms have projected that industry-wide losses are unlikely to exceed $10bn, with analysts at JP Morgan suggesting that insured losses could total as much as $20bn.