The day after the storm hit, Tim Barziza, who leads their team in Corpus Christi said, “I’m hearing from our team that we are some of the first adjusters on the ground, and it is driving some commentary by neighbors of our clients, one of whom noted, ‘Wow! We haven’t even spoken to our adjuster yet.’”

Related: Harvey's cleanup list: Toxic plumes, dead animals, moldy debris

Houston, Texas - August 27, 2017: Cars submerged from hurricane Harvey in Houston, Texas, USA. Heavy rains from hurricane Harvey caused many flooded areas in Houston. (Photo: Shutterstock)

Model behavior

When it comes to estimating losses, every modeler has a slightly different approach. Karen Clark, president and CEO of KCC says their wind and storm surge numbers were based on their hurricane models and the company has an accurate record when it comes to estimating wind damage. “The wild card is inland flooding,” she adds,” because it is difficult to model.”

The company developed a flooding methodology using stream gauge data, estimates of rivers overtopping and rainfall data, and they can overlay high resolution elevation data in order to develop an intensity footprint of an area. “It is updated every day based on the data received, and then improved and refined,” Clark explains.

The company also has a detailed database of commercial and residential property values, as well as auto values for a particular area, which are used as the basis for their estimates. By using the footprint and the database information on property values, the modeler can begin to estimate property damage numbers. “We do work off of two sets of assumptions,” Clark continues. “The first is what would the total property damage be to a specific type of structure? The second is how many of the properties are insured?”

KCC assumes that a certain proportion of commercial and industrial properties will be insured for flood damage, as would most automobiles. Their numbers also take into account a certain amount of residential leakage where some damage will be covered by insurers under wind policies.

KCC estimates $2.5 billion in insured wind damage - $1.4 billion in residential, $.9 billion in commercial/industrial, and $.2 billion in auto. Insured storm surge damage is estimated at $.5 billion and inland flooding at $12.4 billion – $1.1 billion in residential, $8.1 billion in commercial/industrial, and $3.2 billion for auto. The $15.4 billion estimate does not include damage covered by the National Flood Insurance Program (NFIP) or uninsured losses. “All storms tend to be unique,” says Clark. “The amount of rainfall with Harvey was unprecedented.”

Case in point, KCC has started working on damage estimates for Hurricane Irma, which is leaving a trail of destruction as it wends its way through multiple islands in the eastern Caribbean. “There is a lot of uncertainty with Irma,” says Clark. “We’ll take the projected track and estimate if this is its path, these could be the losses.”

Their methodology helps them to predict what possible losses could be and allows clients to determine how to expend their resources. Real time event modeling also helps insurers estimate how many claims they will have and what the claim severity could be for a given storm. While it’s not an exact science, it’s pretty close.

Related: How businesses can minimize the impact of Harvey’s service interruptions

Hurricane Irma is expected to impact almost the entire state of Florida when it makes landfall in the U.S. (Photo: Forensic Weather Consultants)

NFIP coverage estimates

Core Logic, a global property information and analytics provider provided some preliminary residential loss estimates from Hurricane Harvey on August 31 through a press release, and their numbers included insured losses from private insurers as well as the NFIP.

Their data analysis estimated residential insured flood losses at $6.5 billion to $9.5 billion for a 70-county area in Texas and Louisiana. These numbers include inland, flash and storm surge flooding. Core Logic estimates another $1 billion to $2 billion in wind damage for those areas.

Unfortunately, uninsured flood losses were substantially higher and estimated to be $18 to $27 billion, meaning that approximately 70% of the flood damage from Hurricane Harvey will not be covered by federal or private insurance. Losses insured by the NFIP for storm surge, inland and flash flooding are estimated to fall between $6 and $9 billion.

Financial advisor Morgan Stanley’s numbers were slightly higher according to a research update issued on September 1, with total insured losses estimated at between $15 and $40 billion, with $5 to $15 billion of that attributed to the NFIP. Wind damage estimates ranged from $2 to $4 billion; commercial flooding was estimated at $5 to $15 billion; and auto damages fell between $3 and $6 billion.

Modeler Risk Management Solutions (RMS) estimates overall economic losses at $70 to $90 billion, while Moody’s estimate was $75 billion according to the Morgan Stanley report.

Catastrophe modeling firm AIR Worldwide estimates property losses from flooding in the $65 to $75 billion range for all properties, regardless of whether or not they had any insurance coverage. Wind, flood and storm surge damage were estimated at $10 billion ($3 billion from wind and storm surge), but did not include NFIP losses.

The Association of Claims Professionals (ACP) says analysts are estimating that Hurricane Harvey will cost as much as $60 billion in damage to homes, vehicles, businesses and property. Their member firms have thousands of trained professionals who will be going into the impacted areas as soon as it is safe to enter.

An estimated 4 million vehicles in Houston were at risk of flooding during Hurricane Harvey. (Photo: J. Moore/American Technologies)

Vehicle losses

Automotive data firm Black Book says that flooding from Hurricane Harvey has probably damaged more vehicles than any other catastrophe, estimating that as many as 1 million vehicles were affected. Investment banking advisory firm, Evercore ISI, indicates that approximately one in seven cars in Houston were damaged by the hurricane.

Susanna Gotsch, an analyst with CCC Information Services Inc., provides some perspective on the auto losses. In a report detailing Harvey’s potential impact, she explains that Superstorm Sandy resulted in 160,000 auto losses, making it one of the largest number of losses in a single event. In contrast, following a torrential rainfall in Louisiana in August 2016 that dumped more than three times the amount of rain as Hurricane Katrina, more than 60,000 homes and 100,000 vehicles were impacted, resulting in billions of dollars in damage.

The types of vehicles owned in an area can also affect the loss numbers. The vehicles damaged by Sandy were found to be newer, non-domestic models with an average valuation of $15,000 vs. $9,000 for vehicles flooded other major events. Gotsch’s analysis of the vehicles impacted by Harvey estimates their value to be just slightly below those damaged during Sandy.

She says that “in the Houston area as of 2007, there were an estimated 570 vehicles per 1,000 residents. Looking at many of the hardest hit counties to date, there are potentially over 4 million vehicles at risk of flooding.”

To help provide residents and responders coming into Houston and surrounding areas with transportation, Enterprise Holdings has transported more than 4,000 rental cars and trucks into the Southeast Texas region and plans to bring in an additional 17,000 vehicles by the end of September according to a press release.

Related: After the flooding: 6 tips for vehicle owners and buyers

Early estimates from the analysts at Peel Hunt indicate that Hurricane Irma could be a $131 billion disaster if it continues on its Florida-bound track, based on Llyod's Realistic Disaster Scenario. (Photo: Forensic Weather Consultants)

Other types of claims from Hurricane Harvey

Besides the commercial and residential property and auto claims, there will be significant business interruption claims. Impacting those claims will be: service interruption, contingent business interruption and extra expense claims; damage to customers, rental expenses and additional services; claims related to ingress and egress and civil authority issues because of restricted access to a business; environmental claims because of damage to storage tanks and the pollutants that may have been released; inventory losses; rental income and consequential losses such as spoilage claims related to perishables like food and pharmaceutical medications.

According to London-based IHS Markit, which provides information and analysis to a number of industries, oil production in the Gulf of Mexico is starting to normalize as eight of the 20 refineries affected by Harvey have restarted operations and are running close to normal levels, and all but one of the remaining 12 are beginning restart procedures. This faster than expected recovery is expected to have a positive impact on gasoline prices, which rose substantially as the effects of Harvey were felt through the supply chain. However, Hurricane Irma could have some impact on the Florida market depending on which way it travels.

Shipping activity is also almost back to normal as ocean tankers are able to access ports in Corpus Christi to bring in supplies and load up with crude oil exports. Freeport and Galveston ports are also open. While the Houston shipping channel is open, the port of Houston is having staffing issues because so many workers were impacted by the hurricane.

Now modelers are turning their attention to Hurricane Irma which has already decimated the British Virgin Islands, Puerto Rico and the Dominican Republic before heading towards the Turks and Caicos Islands on its way to Florida. The impacts from both Hurricanes Harvey and Irma could be felt by the residents and insurers for several years to come.

Related: Irma lashes Caribbean as Florida braces for destruction