Moody’s RMS: California floods set to cost $7 billion

Moody’s RMS estimates total US economic losses from the recent California flooding in the $5-7 billion range. 

The risk modeller said the estimate reflects inland flood impacts for the US and includes damage to infrastructure. 

Insured losses are anticipated to be between $0.5-1.5 billion, including losses to the National Flood Insurance Program (NFIP) and the private flood market.

The overall economic loss estimate is based on an event reconstruction using the Moody’s RMS US Inland Flood HD Model and reflects property damage, contents, and business interruption, across residential, commercial, industrial, automobile and infrastructure assets.

According to Moody’s RMS, a series of extratropical cyclones starting 26 December 2022 impacted the West Coast of the US, which resulted in heavy rainfall, overtopped rivers, flash floods, levee breaches, mudslides, fallen trees, debris flow, and heavy snow at high altitudes, together with some wind damage.

The rainfall associated with these extratropical cyclones was exacerbated by a band of high atmospheric water vapor, also known as an ‘atmospheric river’.

It added that the rainfall intensity in California was so extreme that several locations in central California set 3-week record rainfall and certain locations received their annual average rainfall totals in less than one month. This led to widespread flash floods and river overtopping: for example, water depths in the San Lorenzo River upstream of Santa Cruz rose by more than 16 feet (4.87 meters) in less than eight hours – the highest recorded water depth for the San Lorenzo River since records began some 85 years ago.

Infrastructure damage, which is accounted for within the economic loss estimates, was extensive. State highways and local roads bore the brunt of the damage due to a combination of flooding and mudslides. Trees previously stressed by dry conditions were uprooted due to high water velocities, saturated soils and heavy winds, which also caused damage to power networks, as well as to cars and properties.

The continuous rainfall and compound impacts from riverine-groundwater-coastal interactions also resulted in prolonged flooding for certain urban coastal areas of California.

Furthermore, according to Moody’s RMS, the continuous drought preceding these extratropical cyclones events adds an extra dimension of complexity for reservoir operators and residents. It said that it is important to highlight that 2022 was the second driest year in over 128 years for certain areas (e.g., Santa Cruz) and was classified under ‘extreme drought’ according to the National Integrated Drought Information System.

It also stressed that, although there has been a significant increase in the water levels of major reservoirs and snowpack, it remains unlikely that California is out of the drought, especially when it comes to aquifer replenishment, given the last three years of extreme drought and excessive groundwater withdrawals.

These storms generated high-intensity rainfall resulting in a high proportion of rainfall running off into the ocean, whereas aquifers generally recharge gradually from less intense rainfall systems and snow melt.

“To put this event in historical perspective with the 1862 ARkstorm, although some impacted areas are similar, the ARkstorm produced much more severe precipitation, for example, 35 inches (88.9cm) of precipitation in San Francisco compared to ~ 15 inches (38 centimeters) from this event. Another important mitigating factor for this event is the presence of flood defences, which were mostly absent in 1862,” said Mohsen Rahnama, chief risk modelling officer, Moody’s RMS.