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Modeled insured loss estimates for Hurricane Florence, which struck North Carolina Friday and was still drenching the area Monday after being downgraded to a subtropical depression, are between $2.5 billion and $5 billion, Willis Towers Watson PLC said in a storm update Monday.
Lower wind speeds will likely make Florence more of a flood event, for which insurance penetration rates are generally low, as opposed to wind damage, which tends to be more traditionally insured, the statement said.
Losses are not expected to roil markets badly, according to Gary Marchitello, New York-based head of property broking for Willis Towers Watson.
“The well-capitalized global property/casualty insurance market will easily absorb losses in this new range, and barring successive storms this season, we would not expect any prolonged hardening of the market,” Mr. Marchitello said. “However, we still expect to see some short-term disruption in the market.”
Additionally, Marsh LLC held a webinar Monday afternoon to update its information and efforts on the storm.
“This is a Harvey-type event, a lot of rain,” said Paul McVey, New York-based managing director for Marsh’s national claims practice, referring to the storm of roughly a year ago that drenched Houston with record rainfall.
There could be additional flooding when the rivers crest, as well as surface water, Mr. McVey said. “We’ll have multiple issues, I believe, with ingress/egress, civil authority, service interruption, and all types of time-element exposures,” such as extra expenses and business interruptions, he said.
Mr. McVey added, however, that it is “too early to tell the actual scope of the problem. Like any catastrophe, it will take some time.”
“We are starting to see initial claim reports; however, it can take longer to assess flood damage in these scenarios,” Mr. Marchitello said in the Willis Towers Watson update.
Ongoing rain and flooding have hampered efforts to collect data and information, according to Beverley Adams, head of visual intelligence and catastrophe planning for Marsh in London.
“Initially we had people driving the streets of Wilmington, North Carolina, on Saturday, but then the rain and flooding worsened,” and evacuations ensued, Ms. Adams said. Likewise, heavy rain throughout the weekend also meant commercial aircraft were grounded, she added.
Clearances to get back into the city began on Monday, Ms. Adams said.
Catastrophe bonds should be able to ride out the storm, according to Willis Towers Watson.
“We expect only a minor impact on the catastrophe bond market,” the broker said in its update.
Out of the approximately $28 billion of property/casualty catastrophe bonds outstanding, more than $13 billion in more than 80 tranches have exposure to the Carolinas. For the most part, the exposure to the Carolinas in these bonds is small, according to Willis Towers Watson Securities, the Willis Towers Watson update said.
The excess and surplus lines market is poised to generate a significant direct underwriting profit this year, but substantial losses may emerge from Hurricane Florence’s likely landfall in the Carolinas on Friday, Fitch Ratings Inc. said in a report issued Thursday.