Hurricane Delta onshore insured losses up to $4bn, offshore up to $1bn: RMS

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Hurricane Delta is estimated to have caused onshore insurance and reinsurance industry losses in the United States of between $2 billion to $3.5 billion, with up to $500 million of wind losses also estimated inshore for Mexico, and up to another $1 billion of insured losses to offshore platforms also expected by catastrophe risk modeller RMS.

hurricane-delta-mapRMS’ estimate for the insurance and perhaps reinsurance market impact from recent hurricane Delta is now the highest so far, in terms of the top-end of the range, although its figures for onshore loss include some $200 million to $400 million of NFIP flood program insured losses as well.

For comparison, Karen Clark & Company was first out with an estimate, saying that onshore insured losses from hurricane Delta would come close to close to $1.25 billion.

Which was followed by CoreLogic’s estimate that onshore and offshore insurance market losses from Delta would be between $1.5 billion and $2.7 billion.

Finally, AIR Worldwide said that onshore insurance and reinsurance market impacts from the storm were in a wide range from $1 billion to as high as $3 billion.

RMS breaks down its estimate as between $1.7 billion and $2.8 billion for insured wind and surge losses, plus $100 million to $300 million of inland flood losses, the $200 million to $400 million of NFIP flood program insured losses, giving the total of $2 billion to as much as $3.5 billion for the United States.

As a result, the bottom end of RMS’ estimate is higher than any other modeller and closest to CoreLogic it seems.

RMS’s estimate includes wind, storm surge, and inland flood losses across the impacted states, including Louisiana, Texas, and Mississippi.

Differently to other modellers though and this is important as it highlights the divergence in strategies and differences between estimates, RMS has applied a 15% reduction in insured onshore losses for the cumulative impacts of Hurricane Laura, which struck the same region six weeks earlier.

AIR treated Delta losses as completely independent from Laura in its estimate analysis.

Jeff Waters, senior product manager, RMS North Atlantic Hurricane Models explained, “The overlapping nature of Delta and Laura will create a complicated claims management and loss attribution process for the industry. Using an innovative combination of high-resolution aerial imagery and machine-learning techniques, the modeling teams at RMS assessed the competing impacts of Hurricane Laura on Hurricane Delta losses. We determined that more than half of the impacted postal codes were also impacted by Laura, representing more than 90% of loss in this event. While Delta caused higher than expected damage to many structures due to pre-existing damage from Laura, reduced overall exposure-at-risk in the overlapping region after Laura means losses attributed to Delta will end up being lower than if Laura had never happened.”

RMS expects most losses from hurricane Delta will hit residential property lines of insurance, with its estimate covering property damage and business interruption to residential, commercial, industrial, and automobile lines of business, along with post-event loss amplification (PLA) and non-modeled sources of loss.

In addition, RMS said that it expects wind related insured losses from hurricane Delta in Mexico, after the storm made landfall there, to be less than $500 million. That takes the top-end of RMS’ onshore insured loss estimate for Delta to $4 billion.

On the expectation that offshore energy insured losses would be less than $1 billion, Rajkiran Vojjala, Vice President, Model Development at RMS explained, “Unlike Laura, which impacted several deepwater oil and gas platforms earlier in the season, we expect offshore losses from Delta to be driven mainly by shallow water platforms. The storm shut in oil and gas production in the region up to levels not seen since Hurricanes Katrina, Rita, and Ike. However, Delta’s lower intensity and size while in the Gulf limited the wave heights and consequently, offshore losses are expected to be notably lower than those experienced in the 2005 and 2008 events.”

Pete Dailey, Vice President, Model Development added, “As expected, Delta weakened from major hurricane status to a weaker Category 2 storm just before landfall due to a combination of conditions, including high wind shear and cooler sea surface temperatures, both of which restrain a hurricane’s intensity. However, winds strong enough to cause damage expanded in width, increasing the number of coastal properties at risk. Fortunately, Delta rapidly weakened after landfall, which reduced the material wind and water-driven impacts across interior portions of the Gulf states.”

It remains to be seen how significant the losses actually are from Delta, but without a doubt there will be some further reinsurance impacts seen and the storm adds to the erosion of aggregates as well.

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