The recent run of heavy disaster losses for re/insurers from events in the U.S. seems set to continue thanks to the current flooding event caused by the record height of the Mississippi river. Flood levels have been rising over the past week as rainwater from a number of severe storms and also some snowmelt make their way downstream.
The high levels of the Mississippi have resulted in the opening of floodgates in Louisiana to prevent the waters reaching more populated areas, of course that has caused the destruction of many square miles of farmland and rural areas. Major flooding continues to be forecast for towns along the Mississippi river basin. The graphic below from the U.S. NOAA shows the significant flooding outlook for the lower Mississippi river basin. It’s likely that flooding will continue for some days to come as the water continues to move downstream.
AIR Worldwide published an Alert catastrophe update for this event on Friday. Their research shows that many of the river gauge levels are significantly higher than were recorded in the last great flood of the Mississippi basin in 1993. That event caused insured losses of $1.27 billion which AIR estimates would amount to $2.6 billion today, taking into account exposure growth and inflation. FEMA National Flood Insurance losses in 1993 amounted to $273m which AIR estimate would be $559m today.
So the current flooding looks like it will cause insured losses well in excess of $2 billion. It’s too early in an event such as this for any accurate estimates to be made, the damage won’t become clear until the river level falls and flooding subsides. Re/insurers are likely to be on the hook for another significant loss though which will continue the trend of 2011 becoming a record year for insured losses and put further upward pressure on re/insurance renewal prices. No catastrophe bonds are exposed to this event as flooding is rarely (if ever) included in the terms of cat bond deals.