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News » US » Insured losses from Hurricane Florence could reach $5bn » published 27 Sep 2018

Insured losses from Hurricane Florence could reach $5bn

Risk modelling and analytics firm RMS has estimated that the insured losses for Hurricane Florence could be up to US$5bn but that 70% of flood losses are likely to be uninsured.

An  image of the storm produced by NASA/NOAA/Naval Research Laboratory Monterey/JPL-Caltec Above: An image of the storm produced by NASA/NOAA/Naval Research Laboratory Monterey/JPL-Caltec

The estimate of US$$2.8bn and US$5bn represents insured losses associated with wind, storm surge and inland flood damage across North Carolina, South Carolina, and Virginia. It includes property damage and business interruption to residential, commercial, industrial, and automobile lines of business. It also factors in post-event loss amplification. The figures also include estimated losses to the National Flood Insurance Program (NFIP); RMS expects these to reach between US$800m and US$1.2bn.

As with events such as Hurricane Harvey and Hurricane Irma, RMS expects uninsured precipitation-induced flood losses from Florence to be material due to the prolonged, record-breaking rainfall. RMS said that 70% of flood losses are expected to be uninsured for Florence.

Accounting for uninsured wind, storm surge, and rainfall-driven flood losses in the US, RMS expects the overall economic loss from Hurricane Florence to fall between US$$6bn and US$11bn. Economic losses, in this case, are losses to all potentially insurable properties, independent of whether they have coverage or not. It does not include items such as roads and utilities, and government-owned property - which is often self-insured, or not at all.

Post-loss amplification is included in these figures as RMS expects that prolonged recovery efforts will create interruption and amplify losses in the coming weeks and months. Florence caused significant damage to infrastructure in North and South Carolina, cutting off access to damage areas and further delaying the return of residents and reopening of businesses. Furthermore, the breadth of Florence's impact in the southeast US, particularly from inland flooding, may produce a large volume of claims for insurers to address, leading to potential claims inflation.  

Hurricane Florence was the sixth named storm of the 2018 North Atlantic hurricane season. It was the first hurricane to make landfall in North Carolina since Hurricane Irene in 2011. Florence made landfall on Friday, September 14 near Wrightsville Beach, North Carolina as a Category 1 hurricane on the Saffir-Simpson Hurricane Wind Scale. Prior to reaching the US mainland, Florence hit major hurricane status (Category 3 or greater), with sustained winds that were estimated by RMS HWind to have reached 127 miles per hour. These wind speeds make it one of the most intense storms to navigate north of 30°N in recent history.

Mohsen Rahnama, chief risk modeling officer, RMS, said: “We were fortunate that Florence weakened considerably before making landfall as a Category 1 hurricane. While wind-driven damages will still be sizable, the story of this storm is the flood impacts. Florence’s slow moving nature brought historic rainfall and flooding to the Carolinas.

“Florence is yet another large inland flood event that exposes the protection gap for flood insurance in the U.S. NFIP take-up rates are less than 1 percent for the vast majority of non-coastal counties in the North and South Carolinas. Thus, we expect much of the losses in interior portions of the region to be largely uninsured.”

 

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This article was published on 27 Sep 2018 (last updated on 27 Sep 2018).

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