According to risk modelling firm RMS the insurance and reinsurance industry is not expected to face any more than $400m in industry losses as a result of hurricane Hermine’s recent landfall in Florida and the subsequent wind and coastal flooding caused by the storm.
Hurricane Hermine struck Florida at the start of September, breaking the state of Florida’s long hurricane landfall drought. Hermine made landfall in the Florida Panhandle but went on to cause storm damage across the southeast and some eastern U.S. coastal states.
RMS estimates that the insurance and reinsurance industry loss associated with hurricane Hermine’s wind and coastal flooding will not exceed $400m, a figure that includes property damage and business interruption caused by wind and coastal flooding to residential, commercial, industrial properties, and auto lines of business.
Residential insured losses are expected to make up around 60% to 70% of the total insurance industry loss and post-event loss amplification is not expected to be a factor from Hermine, RMS explained today.
Tom Sabbatelli, hurricane risk modelling expert at RMS, commented; “Hermine produced damage within the expectations of a category 1 hurricane and RMS analysis shows that this event won’t severely impact the insurance industry. Although Hermine was the first hurricane to make landfall in Florida in eleven years, it did not end Florida’s drought of major hurricane (category 3-5) landfalls.”
RMS based its estimate on hazard reconstructions of hurricane Hermine’s windfield and storm surge using version 16.0 of its RMS North Atlantic Hurricane Models. The analysis shows that on average around 30% of the event loss is related to coastal flooding, including coverage leakage, as well as an escalation in claims severity for wind-only policies in certain situations where wind and water hazards are both prevalent in residential property insurance lines.
RMS’ does not include any claims attributable to the National Flood Insurance Program (NFIP) and also does not include any losses due to inland flooding, although the risk modeller says these are expected to be a minimal contribution to the total insurance industry loss.
At below $400m the insurance loss from Hermine is not significant and reinsurance impact will likely be minimal, meaning the insurance-linked securities (ILS) fund market will also not face any significant impact, if it is indeed impacted at all at this level of loss.