Hurricane Michael insured loss estimates up to $10BPosted On: Oct. 12, 2018 12:15 PM CST
Early estimates of insured losses from Hurricane Michael are in the billions of dollars, according to figures from leading catastrophe modelers.
Boston-based Karen Clark & Co. pegs the damage at “close to $8 billion,” based on the KCC high-resolution U.S. Hurricane Reference Model, KCC said in a statement late Thursday.
The KCC estimate includes privately insured wind and storm surge damage to residential, commercial, and industrial properties and automobiles but does not include National Flood Insurance Program losses, KCC said.
Commercial structures including apartment complexes, office buildings and schools sustained heavy damage. Hotels, especially those along the coast, sustained damage to windows, roofs due to high winds, KCC said, estimating that nearly half of the $8 billion insured loss from Hurricane Michael occurred in two Florida counties, Bay and Gulf.
While Michael was mainly a wind event, storm surge impacts were “devastating” in specific areas, KCC said and estimated total damages from storm surge at $3.7 billion, of which about 10% will be insured.
Morgan Stanley Co. on Friday said “early estimates point to $5 billion to $10 billion industry losses.” Most of the damage was caused by strong winds and storm surge, the bank said in a note.
The rapid movement of Michael also caused less flooding compared with Hurricane Florence, Morgan Stanley added.
The bank said that according to the Florida Office of Insurance Regulation, Universal Insurance Holdings Inc., Citizens Property Insurance Corp., Heritage Insurance Holdings Inc., Federated National Insurance Co. and Security First Insurance Co. are the top insurers in the state.
Florida homeowner insurers, however, “typically have very low retention,” and thus a “majority of the industry losses will be borne by reinsurers,” Morgan Stanley said.
This includes the Florida Hurricane Catastrophe Fund, the NFIP, Lloyd's of London, Residential Reinsurance 2017 Ltd. and Allianz Group, Morgan Stanely said.
CoreLogic Inc. damage estimates for wind and storm surge range from $2 billion to $4.5 billion, but the catastrophe modeler emphasized that these are pre-landfall figures “as the storm is still ongoing and therefore post-landfall figures are not yet available.”
CoreLogic noted, however, that Michael “is a fast-moving storm and, as such, it does not have the same amount of rainfall associated with it as experienced with Florence or Harvey. This is not anticipated to be a large inland flooding event, but there will be localized areas of flooding.
The preliminary loss estimate of $2 billion to $4.5 billion, including wind and storm surge, includes $1.5 billion to $3 billion in residential damages and $500 million to $1.5 billion in commercial damages, CoreLogic said.
“These estimates are based on the pre-landfall forecast. The storm has increased in strength and there is a great amount of uncertainty in these losses with respect to path of the storm and its intensity. If the storm moves westward, west of Panama City, the losses can far exceed this loss estimate because of the increased exposure,” CoreLogic said.
Michael made landfall near Mexico Beach, Florida, at 1:45 p.m. on Oct. 10 with “strong Category 4 wind speeds,” KCC said.
Michael reached peak intensity of 155 mph just before landfall, making it the strongest hurricane to hit the Florida Panhandle in recorded history, KCC said.
The storm also had the fourth-highest wind speeds of a hurricane to make landfall in the U.S. in recorded history, just behind the three Category 5 storms that have made landfall since 1900 – Labor Day (1935), Camille (1969) and Andrew (1992), KCC added.
CoreLogic noted that the maximum sustained winds of 155 mph were only 2 mph from becoming a Category 5 storm.
Hurricane Michael will push 2018 closer to a more normal catastrophe loss year after a “relatively benign first half of 2018,” Fitch Ratings Ltd. said in a note Friday.
Fitch said the property/casualty insurance and reinsurance sectors are “well positioned to absorb the losses from Michael, following losses from Hurricane Florence, as capital remains very strong.”
Michael “is clearly much more of a wind event than flood,” Fitch said, which will result in greater insured losses for the industry.
“The storm's path contrasts with Florence, which lingered over the Carolinas, dumping tremendous rainfall over several days, which created considerable flood losses. With a higher wind-related loss component, private insurers will bear a greater proportion of losses from Michael than Florence, where most of the significant flooding loss is uninsured or is covered by the National Flood Insurance Program.”
The insurance-linked securities market is not expected to be materially exposed to Hurricane Michael, Fitch added.
Risk Management Solutions Inc. and catastrophe modeler AIR Worldwide said they would issue insured loss estimates early next week.