Hurricane Isaias to cost re/insurers up to $5bn: RMS

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Hurricane Isaias’ impacts could drive insurance and reinsurance industry losses of up to $5 billion, according to an estimate from catastrophe risk modelling specialist RMS.

hurricane-isaias-wind-swatheRMS pegs the industry loss as being in a range from $3 billion to $5 billion, with up to $500 million from impacts caused by hurricane Isaias as it barrelled through the Caribbean and from $3 billion to $4.5 billion caused in the United States.

This estimate compares to one from fellow catastrophe risk modeller Karen Clark & Company (KCC) who said hurricane Isaias’ insurance and reinsurance industry losses could reach as much as $4.2 billion, $4 billion for the United States and another $200 million for impacts in the Caribbean.

Also, reinsurance broker Aon had forecast that hurricane Isaias’ industry losses would reach into the billions of dollars.

RMS has included National Flood Insurance Program (NFIP) losses of between $400 million and $700 million in its estimate.

The estimate from KCC excluded NFIP insured flood losses, so the pair of modellers are very close in their estimates for hurricane Isaias.

“Although Isaias weakened to a tropical storm after landfall, it maintained its intensity as it moved up the U.S. east coast and underwent extratropical transition, due to its interaction with a strong jet stream and favorable atmospheric conditions. As a result, many areas of high exposure, especially in the Mid-Atlantic and Northeast, were subject to stronger winds and wind gusts than would otherwise be expected, especially in coastal areas of these regions. It’s another example of how impactful low intensity storms can be,” explained Jeff Waters, senior product manager, RMS North Atlantic Hurricane Models.

RMS’ estimate for up to $4.5 billion of insured losses in the U.S., including the NFIP, is based on wind, storm surge, and inland flood losses across parts of the Southeast, Mid-Atlantic, and Northeast regions.

It reflects losses due to property damage and business interruption to residential, commercial, industrial, and automobile lines of business. RMS also factors in post-event loss amplification and non-modelled sources of loss, including taking the current COVID-19 pandemic into account.

The catastrophe modellers said that the majority of insured losses are expected to be from impacts to residential insurance lines.

“The large number of affected exposures, especially in the Mid-Atlantic and Northeast U.S., are likely to produce large claims volumes. Pressure to settle these claims quickly may lead to claims inflation. We also considered the impacts of the COVID-19 pandemic. We expect fewer loss inspections following this event, potentially causing prolonged repairs and recovery times, both of which tend to inflate claims costs,” Pete Dailey, vice president, Product Management, RMS explained.

Most of the insured loss in the U.S. is expected to be from hurricane Isaias’ winds, while storm surge is only expected to contribute under 10% of the total industry impact.

The Caribbean estimate for hurricane Isaias is only based on damage caused by the storm’s winds.

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