Risk Management Solutions (RMS) have issued a new insured loss estimate for the damage caused by hurricane Isaac when it struck Louisiana and the Gulf Coast two weeks ago and also provided an update on the 2012 Atlantic hurricane season so far. RMS now estimates that insured losses from wind and storm surge impacts on the Gulf Coast will be between $1 billion and $2 billion, excluding rainfall driven flood policies and National Flood Insurance Program losses.
RMS notes that the estimate could include a small amount of loss stemming from so-called coverage leakage, where surge losses may be paid out under a wind policy.
“We’ve formulated our estimate using a blend of modeling tools, combined with our assessment of key areas of uncertainty and non-modeled losses — excluding flood,” said Dr. Christine Ziehmann, director of Model Product Management at RMS. “The width of the range reflects some remaining uncertainties, including the variability and uncertainty around loss at very low wind speeds—mostly tropical storm strength—and, in particular, the uncertainty around coverage leakage of surge related losses into wind-only loss payments.”
“From a wind-damage perspective, Isaac made landfall in the same area where Katrina and also Gustav made landfall in 2005 and 2008, respectively,” Dr. Ziehmann continued. “Both these previous events impacted the building stock and eradicated a large portion of very low-quality roofs and buildings, which could mean that the wind losses fall into the lower end of the modeled range.”
RMS’ new insured loss estimate is inline with other modelling firms and if the insured loss is below $2 billion there will be little impact to reinsurers.
On the 2012 hurricane season, RMS note that we have already experienced the amount of tropical storms that were forecast at the start of the season, and we still have over two months of the season left to run. RMS highlight the key statistics from the season which show that it is currently running at above average, despite forecasts suggesting an average year.
The 2012 Atlantic Hurricane Season has seen 14 tropical storms, with 7 strengthening to hurricane status so far.
- Only one of these hurricanes has become a major hurricane – Hurricane Michael, which intensified into a Category 3 hurricane on September 6, but only maintained that status for 6 hours.
- At this point (September 13) in 2012 the season is the second most active season (tied with 1936) since records began in 1851, in terms of the number of named storms. Only 2005 and 2011 had more named storms as of September 13.
- Eight tropical storms formed in August, making August 2012 the most active August in terms of Atlantic basin tropical storm activity, tied with the 2004 season.
- As of September 13, we are just over half way through the 2012 season, and on average, are currently in the most active month– September 10 is officially classed as the peak of the hurricane season.
- Between 1950 and 2011 on average four tropical storms formed in September, with an average of five tropical storms forming in September between 1995 and 2011. (2004 had four tropical storms in September, and 2005 had five tropical storms in September—all of which strengthened to hurricanes.)
“Seasonal forecasts for 2012, issued at the beginning of August called for around 14 tropical storms in the Atlantic in 2012,” continued Dr. Ziehmann. “The 2012 season is currently on track to exceed these forecasts, especially if September is typical of the 1995-2011 average.”
A weak to moderate El Niño is forecast to develop during September, which has the potential to inhibit tropical storm development. However through the 2004 hurricane season a weak El Niño was prevalent, although there was still an above-average number of tropical storms, hurricanes, and major hurricanes—the season closing with 14 tropical storms, nine hurricanes and six major hurricanes.
You can track the 2012 Atlantic hurricane season here.