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As Harvey moved inland after making landfall over the Texas Gulf coast a week ago as a Category 4 hurricane, catastrophe modeling firms and analysts estimated insured losses of more than $15 billion.
But the losses for the most part will be absorbed by insurers and won’t lead to market-wide rate increases, one analyst said.
The storm will cause approximately $15.4 billion in insured losses, excluding claims filed through National Flood Insurance Program, Boston-based catastrophe modeling firm Karen Clark & Co. said Friday.
The bulk of the insured loss will be from inland flooding, which is projected to cause some $12.4 billion of the total, with wind responsible for $2.5 billion in losses and storm surge responsible for $500 million, according to the Clark analysis.
Morgan Stanley also pinned the insured loss at more than $15 billion but analysts the New York-based investment bank gave a much broader range of estimates. In a research note Friday, the analysts said the storm could cause between $15 billion to $40 billion of insured losses, including $5 billion to $15 billion from commercial flooding, $2 billion to $4 billion from wind damage, $3 billion to $6 billion in auto losses, and $5 billion to $15 billion in National Flood Insurance Program claims.
Corelogic Inc., an Irvine, California-based catastrophe analytics firm, also on Friday announced preliminary residential loss estimates for Harvey showing that an estimated 70% of the $25 billion to $37 billion in flood damage from the storm is not covered by any insurance.
Corelogic said Insured flood loss for homes in the 70-county area in Texas and Louisiana affected by the storm is estimated at $6.5 billion to $9.5 billion, including inland, flash and storm surge flooding, with some $1 billion to $2 billion in insured loss from wind damage. Residential uninsured flood loss for the same area is estimated to be between $18 billion and $27 billion, according to CoreLogic.
A.M. Best Co. Inc., Oldwick, New Jersey, said in a report late Thursday that initial estimates for insured losses ranged from $8 billion to $20 billion and that Texas Gov. Gregg Abbott said the state would need more than $125 billion in federal aid to recover.
In another report late Thursday, New York-based Moody’s Investor Services Inc. said: “While Harvey-related wind damage has been preliminarily estimated in the low billions of dollars, we expect flood-related losses will be much higher. Total insured losses are likely to be moderate relative to overall economic damages.”
Commercial insurers could be hit hard, Moody’s said.
“The preponderance of urban flood losses means commercial lines insurers will bear a higher share of claims than normal for a U.S. hurricane,” Moody’s said. “With heavy rain continuing in the affected region, losses are likely to escalate. Commercial lines claims could also include a high proportion of business interruption losses, depending on contractual provisions.”
Moody’s added that there would be “significant commercial property losses,” but that “it will take time for reliable loss estimates to emerge since claims related to flooding in urban commercial centers will account for a high share of the final bill. Such claims are typically complex and cannot be assessed until waters recede.”
A Thursday report from Aon Benfield’s Impact Forecasting unit said that as of Aug. 31, preliminary data showed that 2,881 businesses in Texas suffered “major damage.”
While the insured losses may help sustain existing rate hikes in the auto insurance sector, a market-wide hardening is unlikely, said analysts at Analysts at New York-based Keefe, Bruyette & Woods Inc. noted in a Friday research report.
“Although we're broadly skeptical that Hurricane Harvey will drive industrywide rate increases in the mostly-soft insurance and reinsurance markets, we think it will prolong the momentum of already-ongoing personal and commercial auto rate increases,” the report said.
Historically, although Harvey will have caused the largest insured hurricane losses in Texas in current dollars, it is not a record breaker when factoring in population and property value growth, according to the Clark statement. The firm estimates that two historical Category 4 hurricanes, the 1900 and 1915 Galveston storms, would each cause over $50 billion in insured losses if they occurred today.
(Reuters) – Property/casualty insurer and reinsurer Lancashire Holdings Ltd. is not exposed to the first $40 million of windstorm reinsurance claims and does not expect to pay out huge amounts from Tropical Storm Harvey, its head of investor relations said.