AIR: Dolly Losses Estimated at $300M to $1.2B

AIR Worldwide estimates U.S. insured losses from Hurricane Dolly at $300 million to $1.2 billion with an expected (mean) loss of $600 million.

The considerable uncertainty in the loss estimates is due to Dolly's slow forward motion, its significant precipitation and the uncertainty in its future track as it makes its way inland. (In this part of the coast, a 10-mile difference north or south has considerable impact on losses.) Also highly uncertain is the rate at which Dolly will dissipate over land. AIR estimates insured losses in Mexico are expected to be less than a quarter of U.S. insured losses.

“After slowing for several hours to a near standstill about 35 miles offshore, the eyewall of Hurricane Dolly finally crossed South Padre Island at around 1 p.m. EDT as a Category 2 hurricane with winds of 100 mph,” said Dr. Peter Dailey, director of atmospheric science at AIR Worldwide. “At 2 p.m. EDT, Dolly was located over Laguna Madre, about 35 miles north-northeast of Brownsville. Winds have diminished to 95 mph and Dolly is now a Category 1 hurricane. Central pressure is estimated at 967 mb. At Category 2 wind speeds (1-minute sustained winds of 96-110 mph), many homes are likely to suffer damage to roof shingles and wall coverings. There may be also damage to unprotected windows from the wind-borne debris.

“Exacerbating the potential damage, Hurricane Dolly virtually crawled toward Texas, battering coastal properties on both sides of the border with tropical storm and hurricane force winds long before the center of the storm actually crossed the coastline. Mitigating the damage is the fact that the sister cities of Brownsville and Matamoros—the largest exposure concentrations on Dolly's path are located about 20-25 miles inland.”

Dr. Dailey stated, “In Mexico, wooden shacks in fishing communities like Higuerilla may not be able to withstand Dolly's onslaught. Neither are they likely to be insured. The dominant construction type of insured properties in Mexico is confined masonry, which should fare reasonable well. Given Dolly's slow forward speed, precipitation-induced flood damage may be significant. Dolly made an earlier landfall as a tropical storm on Mexico's Yucatan peninsula on Monday, July 21, just south of Cancun, where it caused minimal damage.”

According to the Minerals Management Service (MMS) of the U.S. Department of the Interior, oil and gas producers in the Gulf of Mexico shut down about 5 percent of production in the Gulf by Tuesday. Personnel had been evacuated from 49 production platforms. However, Dolly's track is well south of the heaviest concentrations of offshore assets and no lasting shutdowns are expected.

Dr. Dailey continued, “Physical damage to platforms and rigs is likely to be quite limited, with any insured losses dominated by business interruption. There are three reasons why Dolly intensified relatively quickly as it neared the Texas coast: the storm was moving more slowly and thus had much more time to take advantage of the latent energy stored in the warm waters, the wind shear conditions in this part of the Gulf were more conducive to intensification, and hurricanes are able to more efficiently convert heat energy from the ocean to wind energy than weaker tropical storms.

“The experience with Dolly demonstrates that under slightly different environmental conditions, and in particular under a slightly different track, the intensification cycle of such a storm could have been very different. A more southerly track may have resulted in the storm's inability to reach hurricane strength, while a more northerly track could have produced a much stronger storm.”