70% of overall Hurricane Matthew loss uninsured: Aon Benfield

Data and analysis from reinsurance broker Aon Benfield reveals that Hurricane Matthew is estimated to have resulted in an insurance and reinsurance industry loss of roughly $4.5 billion, and an economic loss of almost $15 billion, highlighting a tropical cyclone protection gap in both developed and emerging regions.

Hurricane Matthew occurred in October of last year, resulting in insurance industry losses in the U.S., Canada, and parts of the Caribbean. The most recent analysis from Aon Benfield reveals that insurance industry losses from the storm were significantly lower than the $15 billion economic loss, with only $4.5 billion, or 30% being covered by insurance protection.

Furthermore, Aon Benfield explains that most of the insured loss total occurred in the U.S., approximately $4 billion, or roughly 89% of the total.

In the U.S. alone economic losses totalled around $10 billion, and insured losses $4 billion, representing a broad tropical cyclone protection gap (disparity between economic and insured losses post-event) in the U.S., one of the most developed insurance markets in the world.

“This meant that about 60 percent of the overall loss total went uninsured; a higher than normal percentage for tropical cyclone events,” said Aon Benfield, in a recently published report on the impact of Hurricane Matthew.

The main driver of the higher than normal percentage of economic to insured loss from a tropical cyclone event in the U.S., according to Aon Benfield, is the fact that most of the damage occurred from coastal storm surge, or inland riverine flood, as opposed to being wind driven, which is more typical for this kind of event.

Furthermore, Aon Benfield explains that “In the state of North Carolina, the most prolific flood damage occurred well inland where the vast majority of residents did not own National Flood Insurance Program (NFIP) policies.”

Outside of the U.S., total damages in Haiti from the storm totalled and estimated $2.8 billion, and an estimated up to $1 billion of economic loss was experienced in the Bahamas. In Canada, the loss total is estimated at $150 million, and in Cuba there remains uncertainty although currently, the economic loss is estimated to be minimally $100 million, although Aon Benfield cites unconfirmed media reports of losses in the billions of dollars here.

For the Bahamas, Hurricane Matthew is the costliest and most significant insurance industry loss ever recorded, at a minimum of $400 million. While in Canada Aon Benfield reports that insurers noted payouts above $80 million.

Caribbean countries impacted by Matthew received payouts from the CCRIF SPC totalling $29.2 million, and which thanks to the schemes utilisation of a parametric trigger structure, saw member states receive funds within 14 days post-Matthew, showing just how beneficial parametric structured solutions can be for poorer, vulnerable parts of the world.

“Other economies in some of the small Caribbean Islands – such as St. Lucia and St. Vincent & the Grenadines – cited costly impacts to local crops (such as bananas) and tourism,” explained Aon Benfield.

As the numbers following the impact of Matthew show, the insurance and reinsurance industry protection gap is by no means exclusive to emerging economies, with as much as 60% of the U.S. loss total going uninsured, and roughly 70% of the overall, global loss total being uninsured.

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