Impact of Hurricanes Harvey and Irma on Municipal Credit

With the 2017 Hurricane season just past the midway point, the United States has already been hit by two major storms (Harvey and Irma) that are each expected to rank among the costliest of all time (see Table 1 below). The size and intensity of the storms were contributing factors to the high cost estimates, and explosive population growth and corresponding urban/suburban development magnified these costs.

Damage from wind gusts, rain, and storm surge was significant and will require extensive cleanup efforts. While the extent of the destruction varied considerably depending on location, we believe the credit impact on most affected municipalities will be minimal. Federal support and insurance proceeds are expected to cover most of the cleanup and rebuilding costs, and the stimulative impact of reconstruction will likely offset near-term disruption to economic activity. For example, New York City was able to preserve its strong AA credit ratings following Superstorm Sandy. However, we may see economically depressed regions, such as Puerto Rico and the U.S. Virgin Islands, both of which are U.S. territories, struggling to recover.

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