Hurricane Delta caused $1B damage to oil rigs, pipelines in the Gulf of Mexico: RMS

October 16, 2020.

U.S. insurers are facing nearly $1 billion in insured losses to offshore platforms, rigs and pipelines in the Gulf of Mexico following Hurricane Delta earlier this month, according to new estimates from catastrophe modeler Risk Management Services.

Delta made landfall in Louisiana on Oct. 9 as a Category 2 hurricane, near where Hurricane Laura hit as a Category 4 storm at the end of August, hitting homes and businesses already weakened by the previous storm. Total onshore U.S. insured losses from Delta are estimated to be between $2 billion and $3.5 billion, said Friday.

In Mexico, insured losses from Delta will reach approximately $500 million, primarily in property damage and business interruption to residential, commercial and industrial lines of business.

A large portion of the damage affected the energy industry in the Gulf of Mexico. RMS estimated that insured losses to offshore platforms, rigs and pipelines will total about $1 billion from wind- and wave-driven damages.

“Unlike Laura, which impacted several deepwater oil and gas platforms earlier in the season, we expect offshore losses from Delta to be driven mainly by shallow water platforms," said Rajkiran Vojjala, vice president of model development at RMS. 

"The storm shut in oil and gas production in the region up to levels not seen since Hurricanes Katrina, Rita and Ike. However, Delta’s lower intensity and size while in the Gulf limited the wave heights and consequently, offshore losses are expected to be notably lower than those experienced in the 2005 and 2008 events,” he said.

Delta led to the shutdown of the most oil production since Katrina, with 92% of the Gulf’s oil output down due to evacuations. Other catastrophe modelers estimated total insured losses from Delta to reach about $3 billion, and estimated up to $1.5 billion in offshore damage in the Gulf of Mexico.

Damage from Laura will likely cost U.S. insurers between $9 billion and $13 billion, RMS said in September. To compare the two hurricanes, the Newark, California-based modeler used a combination of high-resolution aerial imagery and machine-learning techniques.

RMS determined that more than half of Delta's impacted postal codes were also impacted by Laura, representing more than 90% of loss in this event.

"The overlapping nature of Delta and Laura will create a complicated claims management and loss attribution process for the industry," said Jeff Waters, a senior product manager at RMS.

"While Delta caused higher than expected damage to many structures due to pre-existing damage from Laura, reduced overall exposure-at-risk in the overlapping region after Laura means losses attributed to Delta will end up being lower than if Laura had never happened," he said.

Delta was the 10th named storm to make landfall in the contiguous U.S. so far in 2020. More than six weeks remain in the Atlantic hurricane season, which ends on Nov. 30. 

--Additional reporting by Theo Wayt