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Hurricane Laura analogues cited at up to $6bn insured loss by RMS


Hurricane Laura analogue storms from the past, so major category 3 to 4 hurricane landfalls that hit similar areas of the Louisiana/Texas border region, show a $0.8 billion to $5.9 billion range of insurance industry losses, according to modelling by RMS.

Tropical storm Laura forecast path and tracking mapCatastrophe risk modelling specialist RMS has shared data that shows historical category 3 to 4 hurricane landfalls that struck a similar region to the current forecast track for hurricane Laura, suggesting a wide range in potential losses for the insurance, reinsurance and potentially insurance-linked securities (ILS) markets.

Four comparable historical hurricanes are given, all of which made landfall close to the current forecast landfall location for Laura, at Cat 3 or 4 intensity.

The figures below are based on an RMS modelled estimate of wind and surge insured losses for Texas and the Gulf Coast only, with all loss figures representing today’s exposure profile and including onshore property losses only.

  • Texas-Louisiana, 1886 – $5.5 billion.
  • Louisiana, 1918 – $0.8 billion.
  • Audrey, 1957 – $3.8 billion.
  • Rita, 2005 – $5.9 billion.

All are based on current exposure levels the insurance and reinsurance market underwrites against, so provide a good proxy for a number of scenario industry losses.

Obviously, every hurricane is different and hurricane Laura is very large and becoming an intense and dangerous Cat 4 storm at this time, so these figures shouldn’t be taken as a definitive guide for what to expect.

But they do show that major hurricanes impacting the same region as Laura can result in lower industry losses than people might expect, given the lower population levels than metro areas. Much lower in fact than the $10 billion to $20 billion figures the reinsurance market has been discussing in the last day or so.

Rita, being the most recent, is interesting. It made landfall with 115 mph Cat 3 winds, so a full 25 mph lower than hurricane Laura currently has and certainly didn’t drive as large a storm surge as Laura is currently forecast to push onshore.

Rita depleted 2.3% of U.S. P&C insurance industry capital, according to data from Swiss Re, so an event the sector could certainly afford to bear, likely with the help of some reinsurance market support.

Rita caused around $25 billion of economic losses in 2005, today that could be higher of course.

It’s important to note that reinsurer Swiss Re estimates that hurricane Rita’s total insurance market loss would be closer to $13.5 billion today, while a less similar but still impactful Gulf Coast hurricane, Ike in 2008, was closer to a $23 billion industry loss event.

Again, it’s important to stress these figures from RMS are modelled outcomes for similar storms to hurricane Laura, in similar geographic location, not a modelled forecast of potential insurance or reinsurance market losses from Laura itself.

Also read:

Hurricane Laura reaches Cat 4 with 140mph+ winds as it heads for landfall.

Cat bonds still unlikely to be hit by hurricane Laura: Plenum.

With a major hurricane landfall approaching in 2020, why can’t I …?.

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