Hurricane Arthur insured losses not expected to exceed $250m: RMS

Risk modelling firm RMS said this morning that it estimates that the insured losses from recent hurricane Arthur, the first of the U.S. season, will not exceed $250m from wind damage and coastal flooding, so this storm will not concern the reinsurance sector.

Hurricane Arthur struck the U.S. coastline at the start of July, strengthening into a Category 2 hurricane before making landfall on North Carolina’s Outer Banks region. Hurricane and tropical storm wind speeds were felt up much of the eastern U.S. coastline and a storm surge combined with heavy rainfall brought coastal flooding to some regions.

RMS’ insured loss estimate for hurricane Arthur includes damages to residential, commercial, industrial properties, automobile and watercraft lines of business as well as business interruption resulting from power outages or damage to property.

“Arthur is the first hurricane to make landfall in the U.S. since Hurricane Sandy in 2012. What is unusual about Arthur, particularly for this time of year, is that it rapidly deepened to become a category 2 hurricane,” commented Brian Owens, senior director, business solutions at RMS. “It’s also rare for hurricanes to form in early July, which climatologically is the quietest time of the hurricane season.”

Inland flooding losses are expected to be a minimal proportion of the total insurance industry loss, said RMS, as the areas affected are primarily residential. These losses will either be covered by the National Flood Insurance Program or will be excluded perils from many insurance policies the risk modeller explained. RMS’ insurance industry loss estimate does not include losses to the National Flood Insurance Program or inland flood loss. RMS also said that it does not expect post-event loss amplification to be a factor from Hurricane Arthur. As much as five percent of the estimated event insured loss is related to coverage leakage, RMS said.

In North Carolina the main drivers of insurance losses from Hurricane Arthur are the impacts of wind and coastal flooding. Mostly residential properties were impacted by the hurricane and those insurance policies typically provide cover for surge-driven flood losses.

In Massachusetts and Nova Scotia, which was also impacted by Arthur, damage is mainly the result of localized inland flooding from the rainfall associated with the post-tropical, by that stage, storm. Damage from wind and coastal flooding in this area was found to be minimal, said RMS.

The RMS insurance industry loss estimate is based on hazard reconstructions of Arthur’s windfield and storm surge footprint, in addition to an analysis of the available damage reports.

At insured loss levels of $250m hurricane Arthur will not impact reinsurance programmes and losses will be largely borne by primary insurance players.