Hurricane Irene has now left the Bahamas islands behind after striking them with devastating winds and storm surges. The main capital of Nassau escaped the brunt of the storm but other, less inhabited islands such as Abaco, took a near direct hit and will be counting the cost this morning. Historic hurricanes have caused as much as $3 billion in damages on the Bahamas alone, and it’s expected that Irene’s effects on the islands could reach $1 billion.
Now, Irene, still a large and dangerous category 2 hurricane with maximum sustained winds of 110mph and hurricane force winds that extend as much as 80 miles out from the centre, is taking aim at the U.S. coastline. The uncertainty associated with her forecast path is reducing as she gets nearer to the U.S. The latest forecasts show Irene making landfall in North Carolina as a category 3 hurricane with winds of 120mph, then emerging back over the Atlantic and skirting the U.S. northeast coastline of New England and New Jersey.
This projected path is one of the worst case scenarios for any landfalling hurricane in the U.S. The fact that Irene could impact many of the largest population centres along the northeast coast means that insured losses in the range of $10 billion+ are highly likely. That could be sufficient to turn the reinsurance market. In fact, Kinetic Analysis say that Irene could cause $13.9 billion in insured losses and $20 billion in economic losses due to lost hours at work, power outages, interruption of shipping and airline traffic alone. Add property damage, flooding damage, interruption to coastal fishing for months to come (and more) and it’s easy to see that this could become a very large loss event. With city’s the size of New York potentially in hurricane Irene’s path it is not impossible to think that this could become a record hurricane loss should the storm make a direct hit on a population centre that large.
The eventual size of the losses from hurricane Irene are very difficult to predict. Should Irene travel directly over any major U.S. northeast city the losses could be very large. Reinsurance broker Willis Re pointed out that even if Irene failed to make landfall and just travelled north along the coastline, the losses could still be significant from storm surge and flooding from the many inches of rain expected to fall.
The catastrophe bond market are certainly keeping a close eye on hurricane Irene now that the uncertainty in her path is becoming less exaggerated. The North Carolina catastrophe bonds issued by Johnston Re Ltd. are both certainly at risk putting $506m of investor capital at risk. The Massachusetts cat bond Shore Re Ltd. adds another $96m to the at risk cat bond capital. There are other cat bonds with exposure to U.S. east and northeast coast hurricanes (including Loma Re Ltd., some of the Residential Reinsurance Ltd. transactions, Longpoint Re Ltd. and perhaps some of the Successor bonds). Many catastrophe bonds have coverage for some U.S. hurricane risks along much of the eastern seaboard states. Some press reports show just four cat bonds with risk from hurricane Irene, we belive there are more with potential exposure depending on the location of landfall and resulting windspeeds and insured losses. All outstanding catastrophe bonds are listed in our Deal Directory.
The latest position of hurricane Irene can be seen in the map below and you can track the storms progress on our 2011 Atlantic Hurricane Season page.
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