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

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.

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.