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Bermudian insurers will be insulated from major losses related to Hurricane Nicole due to their heavy use of reinsurance, according to A.M. Best Co. Inc.
Hurricane Nicole inflicted a direct blow on Bermuda on Oct. 13 as a Category 3 hurricane with sustained winds of 120 miles per hour, the Oldwick, New Jersey-based rating agency noted in a briefing released Friday. The eye of the storm passed directly over the island, leading to high winds, heavy rains, widespread power outages and significant coastal flooding as a result of storm surge.
For Bermuda’s domestic primary insurers, most claims from Nicole are likely to be wind and downed trees, damage to roofs and car damage, as well as some business interruption losses from prolonged power outages or travel disruptions, according to Best.
“However, since primary domestic insurers are heavily reinsured with manageable retentions, it is anticipated that the brunt of the storm’s financial impact will once again fall on reinsurers,” the rating agency said.
“For the reinsurers themselves, this event does not represent a material financial impact and should be easily absorbed,” Best continued.
In Bermuda, residential dwellings and commercial buildings are well-built, with either limestone or concrete blocks, and roofs are mostly made of limestone tiles cemented together, according to the rating agency. Building codes on the island are very strict, allowing for safer structures that can withstand sustained winds of over 100 miles per hour, but Nicole’s maximum sustained winds were in excess of the island’s building codes, which put the island’s structures to the test.
Hurricane Nicole is the first hurricane to hit the island since Hurricane Gonzalo on Oct. 17, 2014 — a Category 2 storm with sustained winds of 109 miles per hour that resulted in insured losses in the range of $200 million to $400 million. Hurricane Fabian, a Category 4 storm that made landfall on Sept. 5, 2003, was the most powerful storm to hit Bermuda in recent memory with sustained winds over 145 miles per hour and insured losses estimated at $300 million, Best said in the briefing.
Insured losses for Hurricane Matthew in the United States and the Caribbean are estimated between $2.8 billion and $8.8 billion, according to AIR Worldwide.