According to Mohsen Rahnama, chief risk modeling officer at RMS, Hurricane Ian has the potential to become one of the largest, if not the largest, insured catastrophe losses in US history, impacting the Florida, reinsurance, retrocession and ILS markets.
Hurricane Ian made landfall near the Cayo Costa area on Wednesday 28th as a major Category 4 storm with maximum sustained winds of about 250 km/h causing widespread flooding, property damage, fatalities and power outages, causing many Residents were stranded as storm surges flooded communities.
Industry loss estimates vary somewhat but remain high, with Verisk putting the re/insurance industry loss at between $42 billion and $57 billion.
CoreLogic put the loss ceiling at $47 billion, while rating agency Fitch was even lower at $40 billion. KBW put the losses somewhere in the “low $30 billion range.”
Recent estimates by KCC put Ian’s insurance market losses at $63 billion closer to Verisk’s. In addition, a recent industry survey conducted by reinsurance news found that the majority of participants expect losses in excess of $50 billion.
Rahnama commented that it will be some time before the full extent of the damage and casualties from Hurricane Ian is fully understood, adding, “Our thoughts are with everyone affected by the storm.”
He notes that splitting losses between wind and storm surge will be a contentious issue, alongside understanding what portion of the damage falls on primary, reinsurance and reinsurance layers, and what is covered by and within the National Flood Insurance Program (NFIP). included is the gap and uninsured.
He adds: “Leakage of claims will focus on factors from amplifying losses due to restrictions on rebuilding supplies and contractors to another big wild card – inflation, which will seep through the system in a variety of ways. “
“The current pre-Hurricane Ian inflation situation and any shortage of materials and qualified contractors in Florida will increase repair costs. I believe the repair will be done in phases, starting with a quick functional repair, followed by the major repair – which requires approval and qualified contractors.”
RMS also noted that Ian’s significant infrastructure damage will slow recovery and exacerbate repair times and casualties, particularly for islands separated from the mainland due to bridge and pier damage. RMS anticipates that full recovery will take years.
Rahnama notes, “As recent events have shown, particularly Hurricane Irma in 2017, which saw many cases end in litigation, we have seen an increase in claims costs. For Ian, we anticipate that some claims will take more than a year to resolve due to potential litigation.”