Hurricane Katrina, which struck the United States in August 2005, is still the most expensive insured North Atlantic hurricane on record and the most costly natural disaster for the global reinsurance industry. The 2020 dollar, according to a Swiss Re report released today, totaled the financial damage from Katrina to more than $ 1
An identical storm today "could easily reach" $ 200 billion, says Swiss Re.
To evaluate what Hurricane Katrina might look like in 2020 in terms of insured and economic losses, Swiss Re ran Katrina's wind and power footprint in 2005 on its US market portfolio with its tropical cyclone loss probability model.
"If Hurricane Katrina were to hit the United States in 2020 with the same wind and storm surge as in 2005, but with current exposure information and updated flood protection and vulnerability assumptions, US insured losses could only increase to $ 60 billion," the report said. "This is true, even though the city (New Orleans) currently had only 80% of the population as it did in 2005."
Private insurance and the Federal Flood Insurance Program covered approximately $ 86 billion of the total loss, highlighting a protection gap mainly driven by uninsured flood losses. Separate flood insurance policies are available through FEMA's national flood insurance programs and private insurance companies.
"With Katrina, and even more recently with Harvey and Sandy and Florence, we have seen this deep protection gap where on average only one in six homes in the United States has a flood coverage policy," says Marla Schwartz Pourrabbani, a Swiss re-disaster specialist and lead author of the report.
Today, a storm like Katrina would cause nearly $ 175 billion in damage due to areas outside of New Orleans, particularly in other coastal states, has both population increases and increased coastal investments that contribute to economic risk. Rising sea levels are also contributing to the potential losses.
Swiss Re says that the effects of climate change could increase overall costs.
"Given that sea levels in the barrier islands near New Orleans are now rising by more than one inch every two years, a six inch rise in sea level – and such an event could occur in just over a decade," the report said.