Catastrophe risk modeller RMS has now provided an initial estimate of insured losses for hurricane Ian, pegging the private insurance and reinsurance market impact at between $53 billion and $74 billion, while saying NFIP losses could be as much as another $10 billion.
RMS said its “best estimate” is for a private insured loss of $67 billion from the major hurricane impacts wrought by Ian.
On the private insured side, wind damage including coverage leakage is estimated at $46 billion to $67 billion, a particularly wide range reflecting uncertainty in the fall-out of hurricane Ian.
Storm surge insured losses, excluding the NFIP, is estimated at over $6 billion, while private inland flood is estimated at more than $1 billion.
Mohsen Rahnama, Chief Risk Modeling Officer, RMS, commented, “Ian was a historic and complex event that will reshape the Florida insurance market for years to come.
“Given the complexity of the event and the multiple drivers of the loss, our ability to deploy multiple RMS field reconnaissance teams to conduct damage assessments throughout Florida, including the heavily affected areas of Fort Myers and Cape Coral along the southwest coast, has been a critical component of our analysis.
“Their assessments have proved invaluable in helping our modeling teams to reconstruct and validate the extent and severity of Ian’s wind and water impacts, and our assessment of the magnitude of the various drivers of the total industry loss.”
RMS said its estimate includes losses from property damage, contents, and business interruption, across residential, commercial, industrial, automobile, infrastructure, watercraft, and other specialty lines.
It also considers the impacts of post-event loss amplification (PLA), inflation, and non-modeled sources such as the Assignment of Benefits and litigation, RMS explained.
RMS’ best estimate for an industry loss of $67 billion from hurricane Ian compares to Verisk’s (AIR) estimate of up to $57 billion, KCC’s estimate of around $63 billion, and CoreLogic’s estimate of up to $53 billion.
“Much of the building stock affected by Ian was also impacted to varying degrees by Hurricane Irma in 2017 and Hurricane Charley in 2004. In some cases, roofs or structures were replaced after Irma and performed well in Ian. However, where buildings were not upgraded to recent codes, Ian’s destructive wind and storm surge will cause widespread roof replacements or total losses. In the loss estimation process, we also considered key aspects of the Florida Building Code, including mandatory limit extensions for ordinance and law, and the application of the 25 percent roof replacement rule. Aside from property damage, we expect significant losses to automobile and watercraft lines in this event due to fewer evacuations in the worst-affected region,” explained Jeff Waters, Staff Product Manager, Product Management, RMS.
“A sizable portion of the losses from Ian will be associated with post-event loss amplification and inflationary trends. A combination of high claims volume, additional living expenses related to the massive evacuation efforts, prolonged reconstruction in the worst-affected areas, and the prevalent higher-than-average construction costs will contribute to a significant economic demand surge. Additionally, we expect the Assignment of Benefits and litigation – despite recent legislative efforts to curb their misuse, to influence the overall loss severity, especially in cases where coverage leakage of water losses onto wind-only policies is likely. All these social inflation factors will lead to complex and lengthy claims settlement processes in this event, amplifying loss adjustment expenses and corresponding claim costs,” added Rajkiran Vojjala, Vice President, Model Development, RMS.