Hurricane Michael is expected to cost the United States economy more than $15 billion, while private and public insurance sources are expected to shoulder at least $8 billion of the costs of the storm, according to broker Aon.
Aon Reinsurance Solutions catastrophe risk modelling and analysis unit Impact Forecasting noted that October has been another costly month for the insurance, reinsurance and likely ILS sector as well, thanks to hurricane Michael and other severe weather events around the globe.
Hurricane Michael was the largest loss event of the month, causing significant impacts to the Florida Panhandle area and more widely in the states of Georgia, Alabama, South Carolina, North Carolina, Virginia, and Maryland.
Aon said that total economic losses from hurricane Michael, including physical damage and net loss business interruption, is expected to rise above $15 billion.
Meanwhile, public and private sources of insurance and reinsurance capital are likely to incur payouts of at least $8 billion, the broker said.
Aon’s estimate for the insured loss to exceed $8 billion sits right in the middle of other insurance and reinsurance industry loss estimates, which call for hurricane Michael to cost from $6 billion to $8 billion.
The impact to the National Flood Insurance Program (NFIP) is expected to contribute somewhere north of $1 billion.
Given the size of the industry loss, hurricane Michael is expected to result in some losses for ILS funds and collateralized retrocession, although in isolation it would not be a significant event. But combined with other loss activity seen in September and October the totals are becoming more meaningful, in terms of NAV impact for ILS funds and other third-party reinsurance capital vehicles.
Michal Lorinc, Impact Forecasting Catastrophe Insight team analyst, commented, “While the majority of the headlines in October centered around the significant impacts from Hurricane Michael, other regions of the globe additionally endured notable catastrophes. In Europe, a series of costly storm and flood events led to a multi-billion-dollar financial impact, with much of the damage incurred to property and agriculture in Italy. The continent, which has been marked by numerous windstorms, severe drought conditions, and prolonged flood events, is currently on track to have its costliest year for weather disasters since 2013.”
Aon’s estimate for economic losses for the European storms that impacted the northern region of Italy is pegged at around $3.4 billion, with the hardest-hit Italian regions being Liguria, Veneto, Lazio, and Trentino-Alto Adige. Veneto alone is expected to suffer a $1.1 billion economic cost from the storms. Another $270 million or greater of economic impact was expected in Austria as well.
Another costly loss in Europe was the unusual impacts of the remnants of hurricane Leslie which struck Portugal, Spain and southern France, causing wind and flood damage and expected to drive hundreds of millions of US dollars of economic costs.
Other natural catastrophe events in the month of October 2018 included:
- Several significant typhoon events in Asia-Pacific, notably Super Typhoon Yutu.
- Multiple landfalling storms in Japan, including Typhoon Trami and Typhoon Kong-Rey, resulting in forecast aggregated economic losses in excess of USD1 billion.
- Cyclone Titli in India; resultant storm surge, high winds and inland flooding killed at least 85 people and prompted economic damage above USD920 million.
- A magnitude-5.9 earthquake off the northern coast of Haiti, which killed at least 18 people, injured more than 540 others, and damaged or destroyed nearly 20,000 homes.
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