Irene damage reaches about $7 billion, a limited impact

McClatchy NewspapersAugust 29, 2011 

WASHINGTON — Hurricane Irene is now in the history books, to be remembered as a storm that could've been a whole lot worse. Even so, flooding left in Irene's wake had experts Monday revising cost estimates upward, now expected to exceed $7 billion in the United States.

"We estimate the overall storm losses around $7 billion, insured losses about $3 billion," said Jan Vermeiren, the CEO of Kinetic Analysis Corp., a risk-modeling firm in Maryland that late last week had envisioned $20 billion in losses before Irene weakened.

Irene came onshore in North Carolina as a Category 1 hurricane, held steady as it passed Maryland and Delaware beaches late Saturday and weakened to a tropical storm by the time it struck Manhattan on Sunday.

Still, its romp up the East Coast left a trail of wind damage from North Carolina to Rhode Island. Heavy, prolonged rains caused the worst flooding in decades in New England states such as Connecticut and Vermont.

Flooding will continue for several days, according to Craig Fugate, the administrator of the Federal Emergency Management Agency.

"We still have rivers that have yet to crest. The River Forecast Center for the Northeast was reporting that some of these rivers may not crest for two to three days," Fugate said Monday during a White House briefing. "So the extent of impacts we still won't know, but, again, many of these areas have been dealing with very dangerous flooding. Some of it has resulted in the loss of life."

The American Red Cross said Monday that it had housed at least 27,000 people along the East Coast in temporary shelters because of Irene and appealed for blood donations, as it was 2,100 donors short of needs. CEO Gail McGovern also pleaded for money donations.

"Frankly, the Red Cross response is going to cost millions of dollars," she said.

TV sets across the nation blared images Monday of swollen rivers cresting over bridges in Vermont. Flooding was so bad in parts of the state that the threat forced FEMA to close disaster-recovery centers Monday in Barre and St. Johnsbury that had been opened after a similar natural disaster in May.

In a statement marking the sixth anniversary of Hurricane Katrina, which caused more than $100 billion in damages, President Barack Obama pledged continued cooperation with state and local governments in the wake of Irene.

"Those response efforts are ongoing and we will continue that partnership, responding as quickly and effectively as possible, for as long as necessary, until the affected communities are back on their feet," the president said.

Many local governments may find rebuilding a challenge, giving the plunging revenues of recent years.

"The weak economy means local governments will be less able to help, and small businesses will be footing the bill," Vermeiren said.

Monday was a day for measuring losses. By Kinetic's estimates, New Jersey and New York led all states in total damages, with estimates for losses respectively of $2.1 billion and $2 billion — about 40 percent of each of them insured losses.

North Carolina ranked third, with an estimated $1.4 billion in damages. This modeling didn't include Vermont.

"Flooding is the big unknown here, and that makes estimate losses quite difficult," said Vermeiren, adding that flood damages in Connecticut and Vermont could result in another $1 billion in losses.

EQECAT Inc., an Oakland, Calif.-based designer of catastrophe-modeling software for insurance companies, also expected flood damage to be high and much of it uninsured. National Flood Insurance Program statistics show that only 3,673 federal flood policies were in force in Vermont this week.

"Flood is not a typically insured peril," said Thomas Larsen, EQECAT's senior vice president, noting that most insurance policies don't cover floods. "We're seeing . . . 20- or 30-year flood levels, something we haven't seen in many years."

The company anticipates that insured losses in North Carolina and South Carolina will range from $200 million to $400 million, about 90 percent of that along coastal North Carolina.

From an insurance standpoint, Irene won't be too costly, with insured losses estimated at $2 billion to $8 billion. By contrast, insurance companies have paid an estimated $40.6 billion on 1.7 million claims for damage from Hurricane Katrina, according to the Insurance Information Institute.

Regarding the Irene estimate, "That's a significant amount of money, but that is not a major event for the insurance industry. ... To put it in context, the tornadoes in Joplin, Missouri, were probably $3 billion. The earthquake in Japan was probably a $30 billion event," said Franklin Nutter, the president of the Reinsurance Association of America. "The industry's preliminary assessment is that much of the damage was to uninsured properties."

Reinsurance is what insurance companies take out to minimize their own losses. Nutter estimates that reinsurers will pick up one-third to half of the insured losses from Irene.

Few companies watch hurricanes and their aftermath as closely as Lowe's Cos., the North Carolina-based national hardware and home-improvement chain.

Its Emergency Command Center had sent out more than 1,000 truckloads of emergency supplies to about 300 stores in the path of the hurricane, which spanned from South Carolina to New England. The center now is deploying for reconstruction needs.

"For example, we can monitor areas along the East Coast that experience extreme high winds during a storm and prepare or expedite roofing materials to those areas. Or we can monitor floods and river crests so that we can prepare and/or expedite flooring and carpeting to those regions," spokeswoman Sarah-Frances Wallace said. "Some of the other items in high demand in the repair and recovery stage of a storm include trash bags, sump pumps, wet/dry vacuums, cleaning supplies, outdoor power equipment and lumber."

Initial emergency supplies were being shipped from regional distribution centers in Valdosta, Ga., Kissimmee, Fla., and Garysburg, N.C., Wallace said. She noted that distribution centers in Pittston, Pa., Plainfield, Conn., and Pottsville, Pa., were tapped for supply duty, and are closest to the hard-hit Northeastern sites.

The cleanup along the Northeast may create a temporary bump in construction-sector employment, but it won't amount to much. The minuses simply outweigh the pluses.

"I think you get immediate opportunity for cleanup companies and roofers and emergency repairs to buildings and roads ... but in terms of being a net positive for construction overall, no," said Ken Simonson, chief economist for Associated General Contractors of America, the trade group for large contractors. "The major replacement work tends to take a very long time. Going back to Hurricane Andrew and the impact it had on south Florida, the evidence is that it took 10 or 15 years to replace the bulk of the housing destroyed there."

"I think people tend to overestimate the positive economic side of natural catastrophes," he said. "You tend to forget that other businesses are shut down permanently or the projects people wanted to start that they now are not doing. The net impact is always negative, destroying property that had some utility."

Economic forecaster RDQ Economics in New York issued an analysis Monday estimating only a minor national economic impact from Irene.

"The Eastern Seaboard can count itself fortunate that Irene was less destructive than it might have been. The loss of life is tragic but at (currently) 35, we can be thankful that it was not greater. If property damage estimates are anywhere close to the mark, the impact of Irene on measured economic activity is likely to be small," RDQ economists wrote, adding that Irene losses are expected to equal "about 0.05 percent of the nation's annual output of goods and services."

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