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Hurricane Matthew caused $1.5 billion to $5 billion in U.S. insured losses, Risk Management Solutions Inc. said Friday, making it the costliest Atlantic windstorm to the insurance and reinsurance industry since Superstorm Sandy struck in 2012.
Meanwhile, insured losses in the Caribbean range from $1 billion to $3 billion, with the highest proportion of the loss occurring in the Bahamas, the Newark, California-based risk modeler said in a statement.
Both loss estimates include property damage and business interruption costs to residential, commercial and industrial lines of business caused by wind and coastal flooding. For the U.S., auto lines are also included, RMS said.
Roughly 70% of the estimated U.S. loss is to residential lines, RMS said, while storm surge-driven coastal flooding caused around 30% of the all-lines losses, including coverage leakage and an escalation in claims severity for wind-only policies where wind and water hazards co-exist for residential lines.
Tom Sabbatelli, London-based product manager on the RMS hurricane modeling team, said there is some uncertainty regarding loss estimates in the immediate aftermath of a hurricane.
“Matthew’s track parallel to the southeast U.S. coast put significant amounts of exposure at risk from damaging winds and surge, which exacerbates this uncertainty,” he said in a statement. “Even small variations in our 10 wind and storm surge reconstructions over the wide swaths of exposure can have a significant impact on the estimated loss.”
RMS said only one of its 10 event reconstructions generated a U.S. loss in excess of $4 billion, but the modeler warned there is a slight possibility that losses could reach $5 billion. The estimate does not include losses to the National Flood Insurance Program or to public buildings and infrastructure.
RMS said its damage surveys indicate that severe flooding, driven by storm surge and record rainfalls, will be the largest driver of economic losses in the southeast U.S, where more than 10 inches of rain fell on large swaths of the region, according to the National Oceanic and Atmospheric Administration.
The RMS loss estimate currently excludes damage associated with inland flooding, as some rivers remain at flood level.
Since residential inland flood losses are covered by the NFIP or are excluded from insurance coverage, RMS said it does not expect the private insurance industry to receive a high number of flood claims. RMS said it anticipates that the insurance industry will cover inland flood losses incurred by commercial and industrial exposure, which tend to be covered as part of multiperil or all risks policies.