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10 years after Katrina, New Orleans is stronger

New Orleans, the US city devastated by Hurricane Katrina 10 years ago this week, is now much more capable of withstanding future windstorms, according to reports from Allianz and Munich Re.

The insurers have compiled reports on lessons learned from the disaster, which resulted in 1833 deaths and $US108 billion ($148.8 billion) in damage.

Katrina hit the city on August 26 2005, leaving an insurance claims total estimated at $US60 billion ($82.7 billion).

The hurricane in the Gulf of Mexico caused a coastal storm surge of more than nine metres, overwhelming New Orleans’ levee system and flooding more than 80% of the city. The city was covered in stagnant water for several weeks.

Munich Re says lessons learned from the disaster include:

  • Storm surge is an important loss factor from a windstorm
  • Enhanced building codes make a significant difference, but they must be updated and enforced
  • The extended clean-up of New Orleans exacerbated business interruption and contingent business interruption losses
  • Hurricane losses are hard to categorise as solely wind or flood
  • “Contract language that is clear when binding the deal may not be so clear after a loss.”

Munich Re says building codes in New Orleans are now better understood and enforced, while buildings have “much better adaptation tools” such as hurricane shutters, strengthened windows and sea walls.

“Katrina led to an era of questioning and rethinking risk models, leading to vast improvements in cat models,” the Munich Re report says.

The disaster also led to the development of an individual view of risk. It is “no longer a one-size-fits-all formula, [with] much greater variance of views of data”.

From a policyholder point of view, Allianz says the main lessons boil down to three points:

  • Clients should be prepared for the worst-case scenario. Undertake simple risk management and have arrangements with suppliers and service-providers. Keep hurricane-related damage in a separate account to make it easier to identify the loss incurred.
  • Think about business continuity.
  • Transparency is key for the insurer.