News Non-Life17 Oct 2018

Global:Hurricane Michael estimated to cost insurers up to US$10bn

17 Oct 2018

Insured losses resulting from Hurricane Michael's winds and storm surge that struck Florida on 10 October will range from $6bn to $10bn, estimates catastrophe risk modeling firm AIR Worldwide.

In a statement, Dr Peter Sousounis, vice president and director of meteorology, AIR Worldwide, said, “Michael is the most powerful hurricane to have come ashore in the Florida Panhandle since the first records were kept in 1851.”

Michael struck near Mexico Beach in the Florida Panhandle on the afternoon of 10 October with maximum sustained winds of 155 mph (250 km/h). The minimum central pressure at landfall—a key measure of hurricane strength—was 919 mb, the third lowest on record for a US hurricane.

At landfall, hurricane-force winds extended outward up to 45 miles from the centre of the system and tropical storm-force winds extended outward up to 175 miles.  It lost strength as it progressed across the Florida Panhandle and into southeastern Alabama and southwestern Georgia, weakening to a tropical storm.

Dr Sousounis continued, “Most wind damage was confined to the Florida Panhandle and southern Georgia, although some local wind-related damage such as downed trees and power lines occurred farther north along the track into the Carolinas. Since Michael was a fairly rapidly moving storm, precipitation accumulation was far less than for Florence, although some of the areas previously flooded by Florence were already saturated.”

Initial reports indicate little significant structural damage in Georgia and the majority of initial reports coming from Alabama, South Carolina, North Carolina, and Virginia indicated downed trees in roadways but very little structural damage.

Reinsurance

S&P Global Ratings said in a report last week that it expected the hurricane to be an earnings event for the US primary insurance and global reinsurance sectors, based on early estimated insured losses.

Giving its estimate on 10 October itself, S&P said that Hurricane Michael was expected to cause coastal and inland damage of up to $4.5bn in insured losses.

The international rating agency also said, “Although the third quarter of 2018 has seen various catastrophes, we believe that the combined earnings for the US insurance and the global reinsurance sectors will absorb the total year-to-date catastrophe losses, including those from Hurricane Michael.”

S&P said too, “We expect reinsurers to be exposed to losses from Hurricane Michael because Florida's insurance market is heavily reinsured and the storm could trigger reinsurance aggregate limits.”

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