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Hurricane Florence will be a “manageable loss event” for the property/casualty insurance industry, according to an analysis issued by Keefe Bruyette & Woods Inc. on Tuesday.
“We expect primary insurers (including auto insurers) to bear most of the losses due to Florence’s size and flood exposed loss content,” wrote Meyer Shields, managing director at KBW in Baltimore, in an industry update. He noted that Newark, California-based catastrophe modeler Risk Management Solutions Inc. has estimated that the storm would cause between $2.8 billion and $5.0 billion in insured losses.
The RMS overall loss estimate includes $1.3 billion to $2.6 billion in losses from wind, $700 million to $1.2 billion in storm surge and inland flooding losses, as well as $800 million to $1.2 billion in losses to the National Flood Insurance Program.
“This estimate reflects property damage and business interruption losses to residential, commercial, industrial, and auto lines of business as well as post-event loss amplification” such as additional interruption from prolonged recovery efforts, demand surge and potential assignment-of-benefits issues, which is permissible in North Carolina, South Carolina and Virginia, Mr. Shields wrote.
He added that the RMS estimates are only modestly higher than Boston-based catastrophe modeler AIR Worldwide’s previously estimated $1.7 billion to $4.6 billion in insured losses.
“We view the relatively tight range between the two catastrophe firms estimates — the upper end is only 9% higher under RMS — as indicative of a manageable loss event for the P&C industry,” wrote Mr. Shields. “Given Florence’s high flood content, we expect Florence losses to mostly impact primary insurers (with some quota share losses likely for reinsurers participating on smaller regionally based accounts), and losses should be generally absorbed within 3Q18 catastrophe provisions.”
The extent of the insured damage caused by Hurricane Florence is still unclear, but some experts are drawing parallels to Hurricane Harvey because, like that storm, Florence is a multiday rainfall event, while others caution against such comparisons.