Irene Could Be One of 10 Costliest Disasters in U.S. History

Insurers may not cover much of the damage, which could cost $10 billion

The New York Times has a sobering report today for those who are complaining about the hype surrounding Hurricane Irene: at an estimated cost of $7 billion to $10 billion, the storm will "most likely prove to be one of the 10 costliest catastrophes in the nation's history" (unsurprisingly, the costliest hurricane, according to the Insurance Information Institute, was Katrina at $45 billion). "Beyond deadly flooding that caused havoc in upstate New York and Vermont, the hurricane flooded cotton and tobacco crops in North Carolina, temporarily halted shellfish harvesting in Chesapeake Bay, sapped power and kept commuters from their jobs in the New York metropolitan area and pushed tourists off Atlantic beaches in the peak of summer," the paper explains. Insurers, the article notes, may not cover a significant portion of the damage along the Eastern Seaboard because flood insurance is excluded from many standard policies and deductibles have risen sharply in coastal areas in recent years.

Confronted with these realities, The Times explores the economic dimensions of the storm. One analyst quoted in the article, Frederick R. Treyz of Regional Economic Models, thinks that the economic losses precipitated by Irene will eclipse economic gains. He estimates that the recovery will generate roughly 42,000 jobs but calculates that disruptions in economic activity during the storm will produce losses that could cost around 62,000 jobs. It's important to note, however, that in the immediate wake of the storm economic forecasts are all over the place, and calculations depend both on the analyst and the factors being considered. The Insurance Information Institute's Loretta Worters, for example, has estimated that the losses associated with Irene will be lower than The Times suggests, more like $2 billion to $5 billion. And Maryland professor Peter Morici believes they will be higher: $20 billion in damages plus billions more in disrupted economic activity. Yet others have focused on a likely short-term boost from the storm.