Damage inflicted in Texas by tropical storm may be more than Hurricane Sandy – and many victims are likely to be uninsured

With the catastrophic Texas floods triggered by the former Hurricane Harvey expected to worsen, early estimates suggest the financial damage it has inflicted has already run into tens of billions of dollars, and one forecaster has predicted the final bill could be as high as $100bn (£77bn).

The tropical storm continues to batter south-eastern Texas, where it has so far claimed at least nine lives, and is expected to reach southern Louisiana. Thousands of homes have been flooded, forcing residents to seek emergency shelter. US authorities estimate 30,000 people will need shelter.

So far, predictions of the final cost of the damage vary widely, although Harvey is expected to be one of the costliest storms in US history. Some analysts are putting the likely damage at $30 to $50bn – but point out that not all of this sum will be covered by insurance. However, David Havens, an insurance analyst at Imperial Capital in New York, told Bloomberg News the final bill could reach as much as $100bn.

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This compares with economic damage of $176bn inflicted by hurricane Katrina in 2005, which included $82bn of insured losses, and the $75bn economic losses caused by Hurricane Sandy in 2012, of which $31bn was insured. The figures are from Swiss Re Institute.

Chuck Watson, of US data analytics firm Enki, said: “Harvey is so destructive not because it was a category 4, but because of the rain and flooding … I would not be surprised to see numbers approaching $42bn, which would put the storm in the top 10, and at the fringes of the top five, most costly storms in US history.”

As personal insurance policies tend to exclude flood cover, most of the flood-related claims will be borne by the US National Flood Insurance Programme.

However, many people in eastern Texas have failed to buy coverage from NFIP or have let their policies lapse, the New York Times reported. It said many never had to buy flood insurance because their property was not listed as being on a 100-year floodplain.

Donald Trump said the cost of recovery from Harvey – the first natural disaster during his presidency – would be “very expensive” but pledged that “the federal government stands ready, willing and able to support that effort”.

Barrie Cornes, a London-based analyst at Panmure Gordon, said the wind damage and flooding, which was showing no sign of let-up, was likely to cause total economic losses of $30 to $50bn.

As for how much of this is insured, Edward Morris and Michael Huttner, insurance analysts at JPMorgan Cazenove, said: “At this stage, it remains early to provide reliable loss estimates, but something in the $10bn to $20bn range appears likely, and could easily be exceeded given the extent of flood damage.”

Lloyd’s of London firms Lancashire, Beazley and Hiscox are expected to be the worst-affected UK insurers. Cornes estimates they face bills of at least £100m each.

Harvey has swamped the Texas oil industry, which processes a third of America’s oil. Companies including Exxon Mobil have shut down their facilities and it will be weeks before refineries return to full operation. This is likely to push up gasoline prices at the pump.

Goldman Sachs estimates that refinery shutdowns have affected 3m barrels a day, about 17% of refining capacity.



“The slow-moving nature of the storm will likely lead to these shutdowns continuing in coming days and may generate persistent damage as well,” Damien Courvalin, the head of energy research at Goldman Sachs, said in a note on Monday morning.

Apart from energy, the construction and shipping industries will bear the brunt of the commercial damage, according to the Lloyd’s of London insurance market. It said it was too early to put a figure on the likely damage.

A spokesman added: “In terms of Lloyd’s exposure, which in Texas includes the construction, energy, marine and hospitality industries, we’ll likely play a key role in the restoration of damaged businesses and communities. In the last five years, the Lloyd’s market has paid out $6.3bn in catastrophe claims payments in North America, so this is an area where we have deep experience.”

Andreas van Embden, an analyst at Peel Hunt, said the US flood programme bears all homeowners’ losses up to $4bn and only transfers 25% of the next $4bn to the private reinsurance market. So if Harvey triggers an $8bn flood loss, reinsurers would face a $1bn claim. He estimates insured losses of up to $12bn.

“Whilst Harvey is a major event we do not see this as being the size of a Katrina or Sandy,” he said.

The top five natural disasters – insured losses and (total economic losses)

2005 Hurricane Katrina – $82bn ($176bn)

2011 Japan earthquake and tsunami – $38bn ($229bn)

2012 Hurricane Sandy – $31bn ($75bn)

1992 Hurricane Andrew – $28bn ($46bn)

1994 Northridge earthquake – $25bn ($73bn)

Source: Swiss Re Institute

