Private insurance industry losses from major hurricane Ian are expected to rise close to $63 billion, according to catastrophe modeller Karen Clark & Company.
In a first post-landfall estimate release from Karen Clark & Company (KCC) late on Friday, the company said it expects a near historic level of insurance and reinsurance market loss from hurricane Ian.
Based on analysis of the output of its high-resolution KCC Hurricane Reference Models, the company said privately insured losses from Hurricane Ian are estimated to be close to $63 billion.
This is largely made up if wind, storm surge, and inland flood losses in the US that the private insurance market is expected to pay, while KCC said that just $200 million of its estimate is for losses in the Caribbean.
KCC’s estimate for the US includes:
- Insured loss to residential, commercial, and industrial properties and to autos
- Building, contents, and time element losses
- Privately insured loss from wind, storm surge, and inland flooding
- Estimated demand surge
- Estimated impacts of excess litigation in Florida
The US figure excludes:
- NFIP losses
- Boats and offshore properties
- Uninsured flood losses
- Uninsured wind losses (e.g. loss under deductibles)
KCC cautions that hurricane Ian will be a particularly complex industry loss, with the fact the majority of the claims will come from Florida being a key driver of a challenging environment.
“Hurricane Ian will be a challenging storm for insurers due to the tremendous amount of coastal flooding and the unique nature of the Florida market with respect to a likely high proportion of litigated claims,” KCC cautioned.
The company said that it has loaded its estimate to account for an element of litigation, weighting it for a similar proportion of litigated claims as was seen after hurricane Irma.
The cat risk modeller said, “Over the past few years, KCC experts have analyzed the trends in litigated claims in Florida and other states. While legislative and policy changes should help to reduce the proportion of litigated claims relative to Hurricane Irma, the large proportion of properties with both wind and water damage may induce more litigation. The KCC estimate includes a comparable proportion of excess litigation as occurred in Hurricane Irma.”
KCC’s insurance and reinsurance market loss estimate does not account for any NFIP losses, so will not include a private market loading for any potential recoveries the NFIP makes from its reinsurance tower.
On an economic loss basis, KCC said it expects the overall bill from hurricane Ian will be well over $100 billion, once uninsured damages, infrastructure, cleanup and recovery costs are factored in.
KCC also highlighted that, “In nominal dollars, Hurricane Ian will be the largest hurricane loss in Florida history.”
The industry loss estimate from KCC, of close to $63 billion, is a good deal higher than the up to $47 billion estimated for private market wind and surge losses from CoreLogic.
As a result, KCC’s loss estimate is the highest seen post-landfall and officially announced so far. It will be interesting to see where RMS and Verisk peg the loss, once their official estimates are available.