New Orleans projected flood losses
The flooding in New Orleans covered an estimated 80% of the city, with 55% of the city's properties being inundated by more than 1.2m of water, with maximum flood depths up to 6 m. During the flood, the water washed out oil tanks, sewerage systems, and two major landfill sites, along with several industrial sites, gas stations, and other locations where hazardous materials were stored. Concerns about the health hazards of the polluted floodwaters were among the principal reasons for the compulsory evacuation of the city.
The flood extent (Figure 15.5) was determined from four different sources of data: Landsat 5 imagery taken on August 31, 2005; Digital Globe imagery taken on September 3, 2005; Federal Emergency Management Agency (FEMA) flood extent maps as of August 31, 2005; and aerial reconnaissance photos taken at 1,525 m on August 30, 2005. Flood depth was determined by using high-resolution (5 m horizontal) LIDAR data, from which RMS constructed a digital terrain model with ground elevation values assigned to each cell in a 100 m x 100 m grid over the greater New Orleans area. The modeled flood depths were validated using aerial reconnaissance imagery taken on August 30, from which flood depths were assessed relative to surrounding structures, automobiles, and other distinguishable objects. A mapping of the
city was also made to determine for each 100 m grid square the number and value of exposed properties based on heights and occupancy types.
A suite of damage curves for structure and contents relative to flood depths were developed based on US Army Corps of Engineers (USACE) studies. An economic loss was then calculated for both residential and commercial structures and contents, by using the flood depth in each grid square and the likely loss to the mix of buildings at that location.
Based on an analysis of National Flood Insurance Program aggregate data, US Census data, and insurance market data, an estimate of the insurance industry's likely proportion of the total economic flood loss was determined. For residential properties, it was assumed that 50% of the residential structure and contents losses would be taken up by the NFIP, while the remainder would be largely uninsured, with less than 3% of the residential loss attributable to excess NFIP residential coverages. Subsequent surveys showed that between 34,000 and 35,000 of the flooded homes carried no flood insurance, including many that were outside designated flood risk zones (Hartwig, 2006).
As for other assumptions in the loss calculation process, the conservative assumption was made that homeowners with all-risk policies, but without flood cover, would still be able to claim additional living expense (ALE) because of the compulsory evacuation of the city under civil exclusion orders. For commercial lines, it was assumed there was a high penetration of excess NFIP commercial flood cover for structure and contents in the flood-affected region and that commercial business interruption (BI) would be a large part of insured losses because of forced evacuations and power interruptions. A 40% demand surge factor was included in all the loss estimates, for residential and commercial building, contents, and time element coverages (BI and ALE).
The overall insured component of the flood losses was estimated at US$15 billion to US$25 billion. Losses of an additional US$10 billion were predicted to be covered by the NFIP. As with other components, there was a large range associated with the projected losses, reflecting a number of factors, including uncertainty around the splitting of water and wind damage claims, the length of time that the floodwaters would stand and the properties would remain abandoned, and how evacuation and civil exclusion would be treated in ALE and BI coverages.
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