The economic cost of Hurricane Irma could rise as high as $300bn (£227bn) as the storm lashes Florida, damaging homes, businesses and key crops including orange groves.
Analysts said about $2tn of property lay in the storm’s path, and also pointed to the potential impact on US food prices. Florida is the second-largest produce grower in the US and the world’s second-largest producer of orange juice.
Torsten Jeworrek, a member of the board of the German reinsurance giant Munich Re, said on Sunday that Irma was “a major event for Florida and also a major event for the insurance industry”.
The hurricane has already unsettled the financial markets, sending insurance stocks falling and orange juice futures surging last week. The price of contracts for November deliveries of frozen orange juice concentrate spiked as investors feared the worst after the destruction Irma wrought in the Caribbean.
Barrie Cornes, an analyst at the stockbroker Panmure Gordon, put the overall economic cost at $300bn, with insurance firms potentially on the hook for between $100bn and $150bn when the clean-up operation gets under way.
Florida also grows other important crops including tomatoes, grapefruits, watermelons and sugar cane. Irma could wipe out as much as 20% of the state’s citrus crop, a significant part of its economy, analysts have suggested.
Alan Konn of the Chicago-based commodity trading firm Price Asset Management said: “The damage to the orange crop is twofold, both short-term disruption but also to the extent crops are completely destroyed.”
Irma could also have a longer-term impact because it takes a few years to grow an orange tree to production, which would limit supply for an extended period, he said in an interview on the financial website MarketWatch.
The insurance industry is still assessing the cost of Hurricane Harvey, which caused severe flooding in parts of Texas last month. Initial estimates suggest the final bill could be as much as $100bn. That compares with economic damage of $176bn inflicted by Hurricane Katrina in 2005, which included $82bn of insured losses, according to the Swiss Re Institute.
Risk modeller Chuck Watson of Enki Research said on Sunday afternoon that Irma looked ‘pretty grim’.
“Damage the roof of a million homes, which is possible in this storm, and the cost racks up pretty quick,” Watson said. He fears that Florida’s orange and grapefruit crop will probably be “severely damaged” if the winds over the centre of the state, between Lake Okeechobee and Orlando, are as high as expected.
The hurricane is “bad news for the Florida insurance market, which is now dominated by smaller firms since the big national companies pulled out after the rash of storms in the mid 2000s,” Watson added.
