According to the state’s Governor Roy Cooper, the economic impact of hurricane Florence on North Carolina could reach as high as $17 billion, which would put the percentage covered by private insurance as low as 27%.
Hurricane Florence struck the U.S. eastern seaboard in September and soaked the state of North Carolina, resulting in significant flooding damage, as well as impacts from winds and storm surge.
Catastrophe risk modellers could not come close to agreeing on the eventual industry loss from hurricane Florence, AIR Worldwide said wind and surge alone would cost from $1.7 billion to $4.6 billion, fellow risk modeller RMS said from $2.8 billion to as much as $5 billion including $800 million to $1.2 billion from the National Flood Insurance Program (NFIP), while Corelogic said between $6 billion and $10 billion but including $2 billion to $5 billion for the NFIP.
So the industry loss estimates cover a wide range but all highlight the fact that despite the devastation caused by hurricane Florence it’s not going to be a market moving event for the insurance and reinsurance industry.
But at an estimated economic cost of $17 billion to the state of North Carolina, the storm will severely dent the states finances for a time, highlighting the need for work to be done to increase uptake of insurance, in particular for insurance and storm surge damages.
“Preliminary impact estimates approach $17 billion in damages across the state. This is over three times the $4.8 billion physical and economic cost of Hurricane Matthew in 2016,” a report from the NC state Governor’s office states.
Business and non-profits in the state are expected to face a hit of an estimated $5.7 billion, while impacts to housing are expected to reach $5.6 billion and agriculture $2.4 billion.
Those three categories are expected to account for upwards of 80% of the final economic impacts from hurricane Florence.
While insurance and reinsurance will play an important role in helping the state rebuild and residents get back to normal, the size of the industry loss is significantly lower than the economic impacts.
“While private insurance coverage is difficult to estimate at this early stage, high-level estimates suggest $4.6 billion in private coverage. That leaves a significant gap of $8.8 billion which will need to be met by a combination of additional federal, private, and state aid,” the report explains.
The $17 billion of economic costs breaks down into over $13 billion of direct effects from hurricane Florence, over $3 billion of indirect or induced costs and another $611 million of resiliency related efforts as a result of the storm.
On top of the expected $4.6 billion of private insurance and reinsurance capital that is expected to flow into North Carolina, a further $2.5 billion of federal money and $800 million from the state will also be paid out, leaving the roughly $8.8 billion of unfunded costs.
To meet those unfunded costs a further $5 billion is being requested from the federal government, but still that will leave an additional $3.8 billion for the state of North Carolina to fund after the event.
Hurricane Florence will provide another clear view of the insurance protection gap that exists in the United States, again evidencing the need for capital and solutions to narrow this gap.