KCC puts hurricane Matthew insured losses at $7 billion

Risk modelling company Karen Clark & Company (KCC) has estimated that the insurance and reinsurance industry will be liable for an industry loss of around $7 billion from hurricane Matthew’s impact on the United States.

KCC is the second risk modelling firm to publish an official estimate of insurance and reinsurance losses from hurricane Matthew, after CoreLogic put its estimate at $4 billion to $6 billion.

KCC aims slightly higher, saying that based on high-resolution storm surge, inland flooding and wind models, the firm estimates that re/insurers will pay $7 billion for hurricane Matthew damage in the U.S.

$3.48 billion of this is down to wind damage, $0.04 billion due to storm surge and $3.43 billion from inland flooding, a total of $6.95 billion.

In terms of economic loss, KCC puts the figure at $16.31 billion. Interestingly, KCC believes that 100% of hurricane Matthew’s wind damage will be covered by insurance, while a much smaller proportion of storm surge and inland flooding will hit insurers or reinsurers.

At a near $7 billion insurance industry loss hurricane Matthew will eat into reinsurance layers. For the ILS market, it would still be expected to leave most catastrophe bonds safe, but cause attritional losses to some collateralised reinsurance contracts and perhaps hit a few sidecars structures to a degree as well.

Overall, at this level of loss, the impact to ILS funds and investors will be relatively limited, although they will certainly pay their share of the industry loss.

Read our previous articles on hurricane Matthew:

– Heritage puts Matthew losses below $100m, Citrus Re cat bonds safe.

– Matthew losses to largely fall within catastrophe budgets: Peel Hunt.

– Laetere Re & First Coast Re cat bonds trade down on Matthew.

– Cat bond index in biggest drop since 2012 on hurricane Matthew.

– Early Hurricane Matthew insured loss estimates suggest up to $6bn.

– ILS investors to share “material portion” of Matthew loss: Dubinsky.

– Hurricane Matthew a test for re/insurers, ILS: Rating agencies, analysts.

– Haiti in line for $20m after CCRIF parametric trigger hit by Matthew.

– As Matthew strikes Florida coast still difficult to forecast losses.

– S&P: 15 cat bonds at risk from hurricane Matthew. We add a few more.

– Matthew could drag down re/insurer returns, but fail to increase rates: Peel Hunt.

– Hurricane Matthew has potential to trigger cat bonds & ILS: RMS.

– Barbados to see $975k from CCRIF parametric payout for Matthew.

– Matthew could hike aggregate cat bond attachment probabilities: RMS.

– Hurricane Matthew threat awakens live cat market.

– Cat bonds in holding pattern, Florida on watch for hurricane Matthew.