Hurricane Beryl's cascade of crises in Texas a sign of storms to come

By Leslie Kaufman

For most of us, disaster damage brings to mind the immediate impacts of a violent storm, like houses with their roofs torn off. 

For insurance and reinsurance companies, that’s just the beginning of their worries. They’re increasingly concerned about cascading damages: the down-the-road disruptions to productivity, health and supply chains that bring their own significant economic costs.

Such costs “are felt through a variety of channels including power loss, the loss of work days, productivity, property damage and higher insurance premiums,” said Chris Lafakis, a climate economist with Moody’s Analytics. Moody’s predicts the global losses from natural disasters will escalate from 1.6 per cent of GDP to 7.1 per cent by 2100.

Hurricane Beryl is a perfect illustration of why concern is growing. Beryl ripped through Texas last week and dropped up to 15 inches of rain in some areas, causing flooding. Storm winds knocked out power to over 1.3 million households and businesses, largely in the Houston area. 

Temperatures then soared into the high 90s Fahrenheit, turning this into a compound event — a hurricane followed by a power outage, coinciding with a heat wave. That posed a health risk for all those enduring the heat wave without air conditioning. (As of Monday evening, about 200,000 customers were still without electricity.) Gas stations couldn’t pump gas; restaurants and stores had food spoilage. Work disruptions threatened productivity. US oil exports were temporarily depressed after ports closed. 

CoreLogic, a data analytics firm that supplies information to insurers, among others, estimated on July 11 that insured losses from Beryl in Texas could run up to $3.5 billion. That estimate, like most for big storms, doesn’t include the cost of medical services such as visits to the ER due to heat stress.

Cascading effects are not new, of course. When the US Federal Emergency Management Agency comes into an area after a storm, it brings everything from generators for power loss to trailers for people unable to return home to low-cost loans for affected business owners. But climate change is scrambling the calculus.

Weeks before Beryl made landfall, the global reinsurance firm Swiss Re issued a report warning that climate change is increasing the risk of cascading effects. The report pointed to a range of them, including some that Texans were about to see play out:   

Wildfires can impact the water infrastructure by contaminating water sources or cutting access to it. Floods and storms can likewise damage energy grids and disrupt transport networks, bringing production lines to a standstill due to lack of power, leading to lost production time, materials spoilage and delays to deliveries. If critical infrastructure and supply chains are affected, the accumulation of damage can be significant.

Both money and time are needed to recover from a big hit, and global heating is reducing the reserves of both. Beryl was unusual for being a named, dangerous hurricane so early in the season. It left Houston in weaker shape and at greater risk if, for example, a Category 4 storm heads the city’s way in September.

Lafakis says due to changing weather patterns, not just cities like Houston but places that aren’t accustomed to hurricanes are now vulnerable. “Because hurricanes are increasingly frequent and their travel maps are randomized, they could hit in places that are not historically hit and are not prepared,” he said.

“The lesson from Beryl is: Expect more of the same.”