AIR puts hurricane Matthew insured loss at up to $8.8bn

by Artemis on October 13, 2016

Risk modelling firm AIR Worldwide has provided its initial estimate of insurance and reinsurance industry losses from hurricane Matthew, putting the figure somewhere in a range from $2.8 billion to as high as $8.8 billion across the United States and the Caribbean.

Hurricane Matthew's waves (image from LiveScience)AIR Worldwide estimates that insurance and ultimately reinsurance industry losses caused by hurricane Matthew in the United States range from $2.2 billion to $6.8 billion, while for the Caribbean they will range from $600 million to $2.0 billion.

Yesterday, Karen Clark & Company estimated U.S. impacts from hurricane Matthew would hit the insurance industry for around $7 billion of losses. CoreLogic had been the first to put out an estimate at $4 billion to $6 billion. RMS has so far not released an official estimate but recent modelled scenarios suggest an insurance and reinsurance industry impact in the U.S. of $2 billion to $8 billion from wind damage alone and $1 billion to $5 billion in the Caribbean. Kinetic Analysis had said around $4 billion for the U.S. alone.

So far the insurance industry loss estimates, for damage caused by hurricane Matthew, and the modelled scenario runs are converging on a total industry impact somewhere around the $4 billion to $6 billion mark.

AIR Worldwide explains what is included and excluded from its modelled industry loss estimate:

AIR’s modeled insured loss estimates for the United States include:

• Insured physical damage to property (residential, commercial, industrial, auto), both structures and their contents
• Additional living expenses (ALE) for residential claims
• For residential lines, 5% of modeled storm surge damage as wind losses
• For commercial lines, insured physical damage to structures and contents, and business interruption directly caused by storm surge (Other flood losses are not modeled or reflected in estimates.)
• For business interruption, direct and indirect losses for insured risks that experience physical loss
• For the automobile line, 100% of storm surge damage
• 2016 Indexed Take-Up Rates
• Demand surge

AIR’s modeled insured loss estimates for the United States do not include:

• Losses paid out by the National Flood Insurance Program
• Losses resulting from the compromise of existing defenses (e.g., natural and man-made levees)
• Losses from the flooding of tunnels and subways
• Losses to uninsured properties
• Losses to infrastructure
• Losses from extra-contractual obligations
• Losses from hazardous waste cleanup, vandalism, or civil commotion, whether directly or indirectly caused by the event
• Other non-modeled losses
• Losses for U.S. offshore assets and non-U.S. property (AIR estimates these losses separately.)

AIR’s modeled insured loss estimates for the Caribbean include:

• Insured physical damage to onshore property (residential, commercial, and industrial) and autos due to wind and precipitation-induced flooding
• Insured loss to contents
• 2016 Indexed Take-Up Rates
• Losses due to business interruption
• Losses to industrial facilities
• Additional living expenses (ALE) for residential claims
• For residential lines in the U.S. territories of Puerto Rico and the U.S. Virgin Islands, 10% of modeled precipitation induced flooding damage under wind policies
• For residential lines in territories other than in the U.S. territories of Puerto Rico and the U.S. Virgin Islands, 100% of flood losses
• For commercial lines in the U.S. territories of Puerto Rico and the U.S. Virgin Islands, insured physical damage to structures and contents and business interruption directly caused by precipitation-induced flooding, assuming a 10% take-up rate for commercial flood policies
• For commercial lines in territories other than in the U.S. territories of Puerto Rico and the U.S. Virgin Islands, 100% of flood losses
• For business interruption losses, direct and indirect losses for insured risks that experience physical loss
• For storm surge, loss is implicitly accounted for in the wind damage functions

AIR’s modeled insured loss estimates for the Caribbean do not include:

• Losses to infrastructure
• Losses to boats (Losses for boats inside a building may be estimated if their replacement value is included as contents.)
• Losses from hazardous waste cleanup, vandalism, or civil commotion whether directly or indirectly caused by the event
• Demand surge (Users may choose to turn on demand surge or input a demand surge function of their own.)
• Other non-modeled losses
• Loss to offshore properties, pleasure boats, and marine craft
• Losses resulting from the compromise of existing defenses (e.g., levees)
• Losses to uninsured properties
• Other non-modeled losses, including loss adjustment expenses

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Read our previous articles on hurricane Matthew:

FedNat to call on reinsurance for hurricane Matthew, HCI to retain.

KCC puts hurricane Matthew insured losses at $7 billion.

Heritage puts Matthew losses below $100m, Citrus Re cat bonds safe.

Matthew losses to largely fall within catastrophe budgets: Peel Hunt.

Laetere Re & First Coast Re cat bonds trade down on Matthew.

Cat bond index in biggest drop since 2012 on hurricane Matthew.

Early Hurricane Matthew insured loss estimates suggest up to $6bn.

ILS investors to share “material portion” of Matthew loss: Dubinsky.

Hurricane Matthew a test for re/insurers, ILS: Rating agencies, analysts.

Haiti in line for $20m after CCRIF parametric trigger hit by Matthew.

As Matthew strikes Florida coast still difficult to forecast losses.

S&P: 15 cat bonds at risk from hurricane Matthew. We add a few more.

Matthew could drag down re/insurer returns, but fail to increase rates: Peel Hunt.

Hurricane Matthew has potential to trigger cat bonds & ILS: RMS.

Barbados to see $975k from CCRIF parametric payout for Matthew.

Matthew could hike aggregate cat bond attachment probabilities: RMS.

Hurricane Matthew threat awakens live cat market.

Cat bonds in holding pattern, Florida on watch for hurricane Matthew.

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