Hurricane Lane a major rain & flood threat to $8bn of Hawaii property

Hurricane Lane continues to track towards the islands of Hawaii as a major hurricane with sustained winds of 145 mph and higher gusts, but with a direct landfall unlikely it is the rainfall threat that is of greatest concern, with as much as $8 billion of property reconstruction values in the storm’s path.

Hurricane Lane became a strong Category 5 hurricane on its route towards Hawaii, but has weakened somewhat and is expected to continue to do so as it makes its closest approach.

Hurricane Lane forecast track and expected path (image will update over time)

By Friday, hurricane Lane may have lost its major hurricane status, but with the effects likely to be felt broadly across the Hawaiian islands, rainfall totals of up to 20 inches are forecast and the topography and building quality in the state means property damage is expected from rains, flooding and landslides.

Hurricane force winds extend outwards from the center of hurricane Lane by up to 40 miles, while tropical storm force winds extend up to 140 miles, meaning the rainfall impacts and strong winds are likely to be felt by all the Hawaiian islands over the coming days.

Hurricane force wind conditions are expected in some parts of Big Island, Maui, and Oahu, while tropical storm force wind conditions are assured for all.

Rainfall totals will be high across the islands, and NOAA warns of “major flash flooding and landslides” from hurricane Lane.

Hurricane Lane is anticipated to produce total rainfall accumulations of between 10 and 15 inches widely, with localised amounts of over 20 inches possible in some areas of the Hawaiian Islands.

Rainfall in that volume has the potential to cause life threatening and property damaging flooding and landslides, which the topography of Hawaii will exacerbate due to mountainous terrain, steep slopes and also typically less robust buildings.

Additionally a storm surge of 2 to 4 feet above normal tide levels is expected along the south and west-facing shores near the center of hurricane Lane, accompanied by large and destructive waves, NOAA said.

Impact Forecasting, the risk modelling unit of insurance and reinsurance broker Aon, warned, “Do not focus on the exact forecast track for Lane, as life-threatening weather conditions extend well away from the center of the hurricane, and significant impacts could be felt on any of the islands.”

Catastrophe risk analysis and data specialist Corelogic explained that up to 48,600 homes with a total reconstruction value of US $8 billion could be at extreme-to-very high risk of hurricane-driven flood damage from hurricane Lane over the coming days.

This analysis from Corelogic focused on only single-family residential properties likely to be impacted by a lower category storm, as hurricane Lane is expected to slowly weaken on approach to Hawaii.

The firm breaks down the island specific statistics using its Flood Risk Score (FRS) as follows:

• Hawaii – Has 1,881 homes at Extreme or Very High risk of flood damage, totaling just over $424 million in RCV.
• Oahu – Has 36,083 homes at Extreme or Very High risk of flood damage, totaling just over $5 billion in RCV.
• Kauai – Has 3,510 homes at Extreme or Very High risk of flood damage, totaling just over $923 million in RCV.
• Maui – Has 7,143 homes at Extreme or Very High risk of flood damage, totaling just over $1 billion in RCV.

Of course these figures denote a worst case scenario really, but they do give an idea of the level of hurricane Lane flood damage that insurance and reinsurance interests could be exposed to, were the worst to happen.

In terms of who is most exposed in the insurance and reinsurance industry, analysis from analysts at Buckingham Research shows that State Farm, Tokio Marine, Berkshire Hathaway, USAA, Heritage Insurance Holdings, Allstate, Liberty Mutual, DB Insurance, AIG and Island Insurance make up the top 10 most exposed underwriters of primary catastrophe exposed business in Hawaii.

Also featuring in the top 20 are such names as Allianz, MS&AD, Chubb, Farmers, Zurich and RLI Corp.

Amongst those are some major users of collateralized reinsurance and ILS protection, not least Heritage of course which has in-force catastrophe bonds that cover its Hawaiian book of property business.

On the pure reinsurance side, based on the analysts research the most exposed is Korean Re, followed by the National Flood Insurance Program (NFIP), HDI, Swiss Re, Everest Re, Allianz, Alleghany, Berkshire Hathaway and ILS specialist Aeolus, followed by Toa Re, Fairfax, AXIS Capital, Factory Mutual, SCOR and Munich Re.

Again, there are firms here with collateralized protection or running their own collateralized reinsurance vehicles, hence third-party capital is exposed to the impacts of hurricane Lane should the flooding and related damage prove to be extreme, or should the path turn and bring the eye of the hurricane closer to land.

The largest hurricane loss in Hawaii in recent times was Iniki in 1992, which caused an insurance industry loss of $1.2 billion and economic damage of more than $3 billion.

But Iniki made landfall and current hurricane Lane is not expected to, as the storm is forecast to be steered away to the west without the eye coming ashore anywhere on the islands.

Despite that forecast, the rainfall total predictions make hurricane Lane a storm to watch, with the potential for some leakage of claims into reinsurance and ILS markets should the eventual economic impact prove high.