The loss from 2018’s hurricane Michael continues to creep higher, with the aggregated insured claims data reported by the Florida regulator now standing just above $6.61 billion, an increase of roughly 10% in the last three months and still with only 84% of claims settled.
The pace of settling claims associated with hurricane Michael has slowed significantly, which is one of the reasons the market has begun to discuss loss creep as a growing factor with this Florida storm.
The insurance and reinsurance market is beginning to fear that hurricane Michael’s industry loss toll could continue to steadily rise, similar to the experience seen with hurricane Irma in 2017, a storm that has yet to see all its claims settled at this time.
In recent weeks, industry sources across insurance, reinsurance and ILS have discussed the potential for hurricane Michael’s loss to continue creeping higher.
The latest industry wide estimate of hurricane Michael’s insurance and reinsurance loss was for an impact of around $11 billion, according to broker Aon, which was released in April and was higher than prior estimates given for the storm.
The continued loss creep reported by Florida’s Office of Insurance Regulation (FLOIR) comes as no surprise then.
The last time we reported the FLOIR’s figures on insurance claims from hurricane Michael in Florida the regulator reported just below $6.1 billion of claims paid, with the percentage of claims closed sitting at around 80%.
That was in mid-March, now a few months on the aggregated insured claims paid figure has risen to just over $6.61 billion, while the percentage of claims closed has only managed to rise to 84% in that time, suggesting a way to go before hurricane Michael’s industry loss will settle.
As we’ve reported previously, it is the commercial classes of claims that are lagging severely behind, with commercial property claims only 57.4% closed, commercial residential just 69.7% and business interruption only 50.9% closed.
Since March, almost 2,400 new claims have been filed for hurricane Michael, while the number of claims cited as open by the regulator has dropped in that period by more than 5,000, suggesting at least that the run rate is favouring claims closure, but still 23,194 hurricane Michael claims remain open.
As a result, there is quite a way to go before the final loss tally can be calculated for hurricane Michael, which leaves the insurance, reinsurance and ILS market still on the hook for any further potential loss creep from the storm.
If the remaining open claims all settled at the average cost paid per-claim closed so far, that could add another $1.47 billion to the FLOIR’s claims total for hurricane Michael, taking the storm to an $8+ billion Florida primary insurance market loss.
Adding in the surrounding states that also felt the impacts from hurricane Michael’s winds and rain, plus any additional capacity lost through industry trigger instruments, retrocessional reinsurance and the like, it’s not too much of a stretch to imagine the final insurance and reinsurance industry loss from this hurricane settling above the current $11 billion top-end of estimates.
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