Hurricane Dorian is estimated to have caused a wind and storm surge related insurance industry loss of between $3.5 billion and $6.5 billion in the Caribbean and Bahamas by catastrophe risk modelling specialists RMS.
The figure is higher than another risk modelling firm AIR Worldwide which said the insurance industry loss to the Caribbean islands would be in a range from $1.5 billion to as much as $3 billion.
RMS said that its estimate represents insurance related losses, so including the volume that will fall to reinsurance and potentially insurance-linked securities (ILS), from wind and storm surge damage across the Caribbean region, mainly in the Bahamas, which was the most severely impacted country.
The modelling firm said that nearly all of the Caribbean insured losses will come from the Bahamas, particularly Grand Bahama and Abaco Islands.
Its loss estimate for the industry reflects property damage and business interruption from wind and storm surge-driven coastal flooding that impacted residential, commercial, industrial, marine and automobile lines of business, including factors for both post-event loss amplification (PLA) and non-modeled losses.
Jeff Waters, Senior Product Manager, RMS North Atlantic Hurricane Models explained, “There is a high degree of uncertainty on the potential impact of post-event loss amplification from this event. Nevertheless, we expect PLA in the Bahamas to be significant due to constrained access to the islands and infrastructure damage. Port closures, damaged roads, and severe damage to the airport will make it difficult to deliver the necessary labor and materials to impacted areas. It will also limit the ability of residents and business owners to return to damaged homes and buildings. Consequently, cost of materials is expected to inflate, and repairs could be prolonged, both of which are expected to amplify the cost of the claims from this event.”
RMS said that business interruption losses will be a significant component of the insurance and reinsurance market loss in the Bahamas as a result of the storm, given the fact hotels and resorts make up a large proportion of the overall commercial exposure on the most heavily impacted islands, which were Grand Bahama and Abaco.
Peter Dailey, Vice President, Model Development at RMS added, “Insured losses in the Bahamas are also expected to settle over a longer period than in a typical Caribbean hurricane given an expected spike in demand for claims adjusters, many of whom will be unable to inspect properties or even access the two main affected islands for some time.”
RMS said that its loss estimate, for wind and storm surge related impacts, were simulated using its version 18.1 RMS North Atlantic Hurricane Models and also RMS ensemble footprints, which are the firms hazard reconstructions of Dorian’s wind and storm surge fields.
As we previously reported, the Bahamas received a direct hit from hurricane Dorian and islands have been devastated, with massive property damage reported and a significant local insurance market loss likely, that global reinsurance capital is likely to assist with.
Insurance and reinsurance market losses of up to $1.3 billion had previously been experienced from strong hurricanes that hit Abaco and Grand Bahama islands, hence it always seemed likely hurricane Dorian could eclipse that total given the devastation experienced.
The Caribbean impacts from hurricane Dorian therefore appear set to near or beat records for the Bahamas islands.