Hurricane Isaias may have caused the insurance and reinsurance industry a loss of as much as $4.2 billion, according to analysis from catastrophe risk modeller Karen Clark & Company (KCC)
It’s the first full estimate of insurance and reinsurance market losses and a fair bit higher than where any of our market sources had been suggesting hurricane Isaias’ costs may end up.
KCC estimates the industry loss will be around $4 billion for the United States and another $200 million for impacts in the Caribbean, all of which is excluding any flood insurance losses taken by the National Flood Insurance Program (NFIP).
This follows reinsurance broker Aon’s forecast that hurricane Isaias’ industry losses would reach above the billion dollar mark.
Hurricane Isaias only reached Category 1 hurricane strength, with maximum sustained winds of around 85 mph.
The storm had struggled through the Caribbean and alongside Florida due to wind shear effects, but regained hurricane status before landfall in southern North Carolina and went on to cause impacts across a wide swathe of northeastern U.S. states, including New York and New Jersey.
KCC said its estimate of insured losses includes privately insured wind and storm surge damage to residential, commercial and industrial properties, as well as insured damage to automobiles.
KCC explained the damage caused by hurricane Isaias:
Impacts in the Caribbean
Isaias brought damaging winds to Puerto Rico, the Dominican Republic, and the Bahamas. Puerto Rico and the Dominican Republic both predominantly experienced downed trees and power lines. In Puerto Rico, around 350,000 customers lost power and many communication towers were rendered inoperable by Isaias.
Areas of the Bahamas impacted by Isaias were similar to those that were devastated by Hurricane Dorian last year, and not all repairs needed after Dorian had been completed by the start of this hurricane season. In the wake of Isaias, roof damage and structural damage from downed trees were observed in commercial and residential buildings.
Impacts in the US
Tropical storm force wind speeds across the east coast resulted in widespread damage and power outages. Downed trees caused scattered instances of structural damage and crushed automobiles throughout the affected area. Over three million customers along the Atlantic coast were without power following Isaias, and power had not been restored to all households several days after the event.
Spotty low-level wind damage to roof coverings, siding, and window openings of commercial and residential buildings has been observed. Severe structural damage appears to be isolated to older buildings or those impacted by the tornadoes spawned by Isaias. There have been instances of buildings with unique architectural features sustaining significant damage.
At $4.2 billion, the estimate from KCC is a fair bit above where market sources had been suggesting the insurance and reinsurance impacts of hurricane Isaias may settle.
But with a very wide area of the U.S. exposed, the aggregation of property damage could elevate the overall total somewhat, making Isaias a more meaningful industry loss than had been assumed.
At $4.2 billion, some reinsurance programs would likely support primary carriers in paying their claims, as well of course as quota share coverage. Meaning there is the potential for a little leakage to the ILS market, through collateralised covers or quota shares that are exposed.
Analysts at KBW said that they expect claims from Isaias will be largely retained in the primary market, but that some carriers could see this event pushing some primary insurers close to, or above, their aggregate reinsurance attachment points.
Given the U.S. severe weather suffered in recent months and now the potentially very active hurricane season, KBW said this should all help to provide further momentum to reinsurance pricing and primary rates.
View all of our Artemis Live video interviews and subscribe to our podcast.
All of our Artemis Live insurance-linked securities (ILS), catastrophe bonds and reinsurance video content and video interviews can be accessed online.
Our Artemis Live podcast can be subscribed to using the typical podcast services providers, including Apple, Google, Spotify and more.