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Efforts put into the construction of control structures on the Mississippi over the last 80 years have paid off. The actual losses of US$ 4.6bn were well below the worst-case scenario of over US$ 100bn.
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Rivers in the catchment area of the Mississippi began to rise in May after a winter of heavy snowfall and exceptional rainfall in late April 2011. Driven by the weather phenomenon known as La Niña, within the space of a few weeks, many areas were deluged by rainfall that exceeded the average precipitation figure for an entire year. A flood wave bigger than any since 1927 built up on the Lower Mississippi. In 1927, tens of thousands of square kilometres were flooded. This resulted in one of the worst natural catastrophes in the history of the USA, with at least 250 fatalities and 650,000 evacuated from their homes. The losses in 1927 amounted to US$ 230m (some US$ 3bn in today's values).
According to the US Army Corps of Engineers (USACE), losses from the 2011 floods could have reached up to US$ 110bn. The floods actually caused losses totalling an estimated US$ 4.6bn, which is remarkably low considering their extent and severity.
The US army's hydraulic models are among the best in the world
National disaster was averted in 2011. One of the main reasons for this was that the great flood of 1926/1927 not only brought record flows and water levels which remained unsurpassed for many years, but also marked the beginning of extensive flood control efforts along the Mississippi and its main tributaries. The Flood Control Act was passed in 1928 and the "Mississippi River and Tributaries" (MR&T) project launched. The sum of US$ 325m (in original values) was appropriated for the construction or repair and reinforcement of dykes, dams, pumping stations, flood detention systems and diversions on the Mississippi and its tributaries. This topped the total of US$ 292m which had been invested in hydraulic engineering measures along the Lower Mississippi prior to 1928.
The US Army Corps of Engineers was given the task of implementing and maintaining these measures. Since then, the Corps has become a highly respected engineering unit whose physical hydraulic models and mathematical hydrological and hydraulic models are among the best in the world.
Better use of the waterways brings billions in revenues
Since 1927, dykes have been erected over a length of 3,500 km and the water is now detained by a large number of basins. The six large reservoirs on the upper reaches of the Missouri alone can accommodate 90bn m3 of water. In addition to flood control, the structures were also designed with an eye to ensuring a minimum depth of water for shipping, the use of hydropower as well as irrigation and recreational aspects.
To date, the MR&T project has cost US$ 13.9bn (in original values). The Mississippi River Commission has estimated that it has prevented losses in the amount of US$ 480bn or 34 times the sum invested. The use of the river as an inland waterway yields further revenues, which are estimated to come to almost US$ 3bn per year. The tonnage transported on the Mississippi has risen from 30 to 500 million tonnes since 1940.
Emergency spillways are installed to prevent dykes failing at random points in the event of floods. These may take the form of longitudinal weirs, or they may be created by detonating a dyke. All three emergency spillways on the Mississippi were in use at the same time during the 2011 floods – the first time this had ever happened.
Flood management benefits the insurance industry
The private insurance industry benefited from the flood management. However, insurers will have to indemnify a number of casinos along the Mississippi, nearly all of which incurred considerable losses due to business interruption but no property damage. A large railway company in Louisiana is a similar case: its business had to be suspended completely. Activating spillways and floodways significantly reduced the risk of flooding for many industrial plants and consequently saved insurers considerable losses. Eight refineries at Baton Rouge, which account for 12% of US fuel production, and a nuclear power plant were among those which profited from this measure.
In the USA, agricultural losses can be insured under an all risks cover. Roughly 80% of all farmers make use of this option. A large proportion of the losses are attributable to deliberate flooding by the USACE. By law, the government is not obliged to indemnify such losses. Despite this, the USACE advises those who are not covered by the National Flood Insurance Program to formally sue the Corps either under the Federal Tort Claims Act or for "taking of property".
Markus Steuer
Consultant and wildfire expert, Corporate Underwriting
msteuer@munichre.com
Only fully integrated prevention strategies can reduce losses from flood catastrophes.