Moody’s estimates economic losses of between 5,000 and 7,000 million dollars due to the floods in California

Moody’s RMS, a global catastrophe and risk modeling solutions company, estimates the total US economic losses from the recent flooding in California to be between $5 and $7 billion.

CaliforniaThis estimate reflects the impacts of flooding in the interior of the US, which includes damage to infrastructure. Insured losses are expected to range from $500 million to $1.5 billion, including losses from the National Flood Insurance Program (NFIP) and the private flood market.

Since late December, California has been battered by extreme rains and winds, leaving entire neighborhoods under water, toppling trees and triggering severe mudslides.

Moody’s notes that the overall economic loss estimate is based on a reconstruction of events using its US Inland Flood HD Model. The overall loss also reflects property damage, content, and business interruption to residential assets. , commercial, industrial, automotive and infrastructure.

Moody’s explains that the storms are being driven by an atmospheric river, which is a windy region of Earth’s atmosphere that can carry moisture for miles.

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The intensity of the rainfall in California was so extreme that several places in central California set three-week rainfall records, and certain places even received their annual average rainfall totals in less than a month.

Damage to infrastructure, which is accounted for in the estimates of economic losses, was extensive. State highways and local highways bore the brunt of damage due to a combination of flooding and mudslides.

In addition, Moody’s notes that the continued drought that precedes these extratropical cyclones adds an additional dimension of complexity for reservoir operators and residents.

Moody’s notes that 2022 was the second driest year in more than 128 years for certain areas, such as Santa Cruz, and was classified as ‘extreme drought’ according to the National Integrated Drought Information System.

However, while there has been a significant increase in water levels from major reservoirs and snowpack, it remains unlikely that California will be out of the drought, especially when it comes to aquifer replenishment, given the last three years of extreme drought and excessive extraction of groundwater. .

Moody’s RMS director of risk modeling Mohsen Rahnama said: “To put this event in historical perspective with the ARkstorm of 1862, although some affected areas are similar, the ARkstorm produced much more severe rainfall, for example 35 inches ( 88.9 centimeters) of precipitation in San Francisco compared to ~15 inches (38 centimeters) for this event.Another major mitigating factor for this event is the presence of flood defenses, which were mostly absent in 1862.”

Moody’s states that insurance is expected to cover only a relatively small proportion of the economic damage, with the total number of California households with flood insurance at less than 2%, a figure that has been steadily declining.

Additionally, Moody’s notes that as of August 2022, there were only 193,281 National Flood Insurance Program (NFIP) residential policies, representing a decrease of about 5% compared to 2021.

Moody’s also addresses how these low flood insurance take-out rates are attributed to the fact that only homeowners who have a government-backed loan and who live in Special Flood Hazard Areas (SFHAs) are required to obtain a flood insurance policy. However, the main issues surrounding this are that the SFHA boundary flood zones do not always reflect current flood risk and are infrequently reviewed.

In addition, other contributing factors that affect flood insurance acceptance rates include, but are not limited to, affordability, the misconception that flooding is covered under a standard homeowners policy, and a lack of understanding of the cost incurred. associated with floods.

Firas Saleh, director of product management at Moody’s RMS, added: “Extreme drought leads to soil compaction, which means less infiltration and more runoff, therefore less aquifer recharge and increased risk of flooding. No place is safe from flooding in California today. If we have learned anything from this extreme rainfall and subsequent damage, it is that even flood zones perceived as low risk are still flood zones. If it rains, it can overflow.”

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