Hurricane Dorian’s category 5 winds and devastating storm surge are expected to result in combined insurance and economic costs of at least $7 billion, according to an estimate from Karen Clark & Company.
The company believes that this figure will be reached based on insurance and reinsurance market losses as well as uninsured losses to buildings and contents, as well as business interruption exposures for commercial, residential and industrial property.
However, the $7 billion estimate does not include damage to infrastructure or auto losses, hence it seems safe to assume the eventual economic toll is going to be higher.
In addition, the business interruption exposure will likely extend into contingent business interruption losses, to industries such as travel and tourism.
Plus the lost revenue over the coming years, due to the prolonged period of rebuilding and recovery that is likely to be necessary, could exacerbate both economic costs, as well as some fresh impacts for the insurance and reinsurance sector.
Dorian was the fourth category 5 hurricane on record to hit the Bahamas, but the first with wind speeds of more than 185 mph, catastrophe modellers Karen Clark & Company (KCC) explained.
Dorian also stalled for more than 24 hours, bringing extreme winds and high storm surge to Abaco and Grand Bahamas islands.
As we previously explained, the Red Cross said they expected around 13,000 residential properties to have faced damage or total destruction from hurricane Dorian.
Insurance and reinsurance market losses of up to $1.3 billion have been experienced with previous strong hurricanes that hit Abaco and Grand Bahama islands, so hurricane Dorian is likely to cause an industry impact of above that level it would seem, given the devastation being reported.
A significant local insurance market loss is likely for the Bahamas, with some support from global reinsurance capital likely required to assist, as Bahamian insurers and those operating there would tend to be well-protected given the catastrophe exposed nature of the islands.
KCC explained that most of the damage has occurred on Abaco and Grand Bahamas islands, although some other islands also had less severe impacts from Dorian.