It's been a long couple of weeks for business and residents along the Mississippi River. As the flood inundates the Delta, we gauge the insured and economic losses.
By MATTHEW BRODSKY, senior editor/Web editor of Risk & Insurance?
The national media has the attention of a 1-year-old, chasing the story of whatever disaster is in front of it at the moment. Lately, the zig-zag's been tornado, flood, tornado. The way events along the Mississippi River have yet to unfold, perhaps the headlines will veer back toward flood.
So far, the flooding in the South along the Mighty Mississippi has impacted nine states: Arkansas, Illinois, Indiana, Kentucky, Louisiana, Mississippi, Missouri, Ohio and Tennessee.According to catastrophe modeling firm Risk Management Solutions, citing the May 23 update from the National Weather Service, at least four cities in the region are reporting major flooding still: Arkansas City, Ark.; Greenville, Miss.; Natchez, Miss.; and Baton Rouge, La. These towns can expect to remain at major flood levels until at least May 30. In Vicksburg, forecasters are calling for the Mississippi River to remain above flood levels through June 14.
Mother Nature is not relenting. Severe storms struck the Lower Mississippi River region over the weekend, and the NWS is calling for a secondary cresting in Missouri through Tennessee, with Memphis, Tenn., possibly getting hit again on May 29.
Damage in Memphis from the first cresting was estimated at $753 million in crop, residential, business and infrastructure losses, according to a Ball State University study, cited in a New York Times article.
"I am going to estimate in the $6 billion to $9 billion range for total damages from Memphis southward to the gulf," the author of that research paper, Michael J. Hicks, director of the Center for Business and Economic Research at Ball State, told the Times.
Perhaps the industry most impacted from the flood waters has been agriculture. The American Farm Bureau Federation estimated on May 23 that 3.6 million acres of farmland had been hit by the floods. That includes 40 percent of this year's domestic rice crop.
"There is no doubt about it, the effect of the flooding on farmers and ranchers is being felt deeply across the South," said AFBF Chief Economist Bob Young, in a statement.
"In many of these areas, agriculture is the major economic driver for the region," he said.
The AFBF estimates that Arkansas farms have been hit the hardest, with 1 million acres affected, including 300,000 acres of rice and 120,000 acres of wheat. Mississippi and Missouri experienced 600,000 and 570,000 acres of impacted farmland, respectively. Tennessee reported 650,000 acres. About 500,000 acres of Illinois farmland could be under water and Louisiana currently is seeing 280,000 submerged acres.
To put a dollar figure on these massive numbers, the Arkansas Farm Bureau is estimating more than $500 million in damages, according to economist John Michael Riley, cited in USA Today. Overall, agricultural losses in Mississippi could top $800 million.
GAMING ON THE RIVER
Also impacted is the gaming industry. John Bullock, president of Willis of Mississippi Inc., declined to give an estimate for possible insurance losses for the industry for this "flood of epic proportions," given that events are still playing out.
"Both owners and insurers are actively involved in measuring those losses," Bullock said, adding that losses could come from direct damage, as well as from business interruption, denial of access, ingress/egress, and civil authority coverages. Bullock works with gaming clients up and down the Mississippi from southern Indiana down.
COMMERCIAL INSURANCE LOSSES
According to Boston-based modeling firm AIR Worldwide, given the magnitude of this event, it is clear that there will be significant commercial losses when this event is compared to the last great flood on the Mississippi, in 1993.
"According to Munich Re, the insured losses (presumably mostly commercial) in 1993 were $1.27 billion, which AIR estimates would amount to $2.6 billion after accounting for exposure growth and inflation. Meanwhile, the FEMA (NFIP) losses in 1993 were $273 million, which AIR estimates would amount to $559 million after accounting for exposure growth and inflation," Kevin Long, AIR spokesman, told Risk & Insurance? in an e-mail.
That 1993 event was the most expensive flood for the economy during the period between 1980 and 2010 with total economic losses reaching $21 billion, as estimated by the Munich Re NatCat Service.
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