By Mike Colpitts
The economic damages caused by Hurricane Irene as it barrels in on the Atlantic coastline forecast to make landfall in North Carolina could hit as high as $35 billion, according to insurance estimates made prior to the storm even making landfall.
However, as scientific modelers race to come up with a dollar estimate on how much damage the massive storm is likely to cause, estimates vary hugely from near $5 billion all the way up to $35 billion depending upon who makes the estimates.
The economic impact of Hurricane Irene is contingent upon a series of factors, including the storm’s size and strength at the time it makes landfall, the direction of the hurricane’s steering currents when it hits, rainfall, flooding it produces and storm surge levels.
University of Colorado science professor Roger Pielke estimates property damage at a conservative $4.7-billion. But Pielke, who matches historical models of past hurricanes to come up with his estimates, only includes the value of property that is destroyed, while others take into account many additional factors.
A Category 2 storm like Irene was moving at Friday night, making a direct hit on New York City could trigger $35 billion in damages, according to Nate Silver, a political columnist for the New York Times who provides best and worst scenarios. According to his model, a hurricane with 100 mile per hour winds making a direct hit on Manhattan, an unlikely scenario, would wreck havoc all over Gotham.
Dollar damage estimates vary greatly prior to major hurricanes making landfall. Air Worldwide, a disaster modeling firm hasn’t offered any estimate of damage prior to Hurricane Irene making landfall.
Irene caused up to $1.1 billion in insured losses in the Caribbean, according to Air Worldwide. More than 60% of the losses took place in the Bahamas and were caused mainly by wind damage and flooding to homes and other residential properties.
Facing likely billions of dollars in losses from Irene, insurance companies like Allstate saw their credit default swaps rise on Wall Street this week as investors prepared for the worst, bracing for Irene to hit the Atlantic coastline and march up the coast as the National Weather Service forecast track shows. The default swaps act as insurance to protect insurance companies to cover losses due to disasters.
Another computer model known as the WRF Model estimates $5 billion in damages with the hurricane hitting Long Island, which has 7 million residents as a Category 1.
Closer to Hurricane Irene itself Savannah, Georgia Kinetic Analysis says that losses could range as high as $6 billion if the storm sticks to its forecast track, and much less if it veers off track into the Atlantic Ocean, which everyone is hoping for as Irene moves quickly inland.
In a report released just last month, real estate research firm CoreLogic, indicated that residential property exposure as a result of storm surge damage from hurricanes in ten major urban cities along the U.S. Gulf Coast and Atlantic coastlines could result in more than $300 billion in property damage.