USA – Insured Losses From Hurricane Matthew Could Reach $5 Billion

RMS, the world’s leading catastrophe risk management firm, estimates that insured losses for the U.S. from Hurricane Matthew will fall between $1.5 and $5 billion.

In the Caribbean, RMS estimates that insured losses will fall between $1 and $3 billion, with the highest proportion of the loss emanating from The Bahamas.

The losses make Hurricane Matthew the costliest Atlantic hurricane to the (re)insurance industry since Sandy in 2012.

Floods in North Carolina, October 2016. U.S. Army National Guard photo
Floods in North Carolina, October 2016. U.S. Army National Guard photo

Majority of Losses are Residential

Approximately 70 percent of the estimated U.S. loss is to residential lines, while storm surge-driven coastal flooding is estimated to contribute around 30 percent of the all-lines loss – including coverage leakage and an escalation in claims severity for wind-only policies in situations where wind and water hazards co-exist in residential lines of business. Only one of the ten RMS event reconstructions generated a U.S. loss in excess of $4bn. However, the company advises there is still a small possibility that losses could reach as high as $5bn.

The RMS estimate does not include losses to the National Flood Insurance Program (NFIP) or to public buildings and infrastructure.

Both loss estimates include property damage and business interruption, caused by wind and coastal flooding upon residential, commercial, and industrial lines of business. For the U.S, auto lines of business are also included.

To produce the RMS loss estimate, the RMS event response team reconstructed Hurricane Matthew’s hazard, calibrating with insights gained from both remote and on-the-ground surveys of the damage by the RMS reconnaissance teams.

Potential non-modeled loss observed during the RMS damage surveys in Florida, the southeast U.S., and The Bahamas, included frequent instances of beach erosion in the southeast U.S. driven by both wind and storm surge, as well as mold growth following the flooding that could escalate the vulnerability of exposures.

Inland Flooding a Significant Contribution to Overall Losses

The damage surveys conducted by the RMS reconnaissance team indicate that severe flooding, driven by storm surge and the record rainfalls will prove to be the largest driver of economic losses in the southeast U.S. However, at this time, the RMS loss estimate excludes damage associated with inland flooding, since a post-event estimation of the impact of inland flooding can only be completed once all inland flooding has concluded – and some rivers remain at flood level.

Since residential inland flood losses are covered by the National Flood Insurance Program (NFIP) or are excluded from insurance coverage, RMS does not expect the private insurance industry to receive a high number of flood claims. However, RMS anticipates that the insurance industry will cover inland flood losses incurred by commercial and industrial exposure, which tend to be covered as part of multi-peril or all risks policies.

Hurricane Matthew’s impacts in the U.S. were not limited to its time of landfall. Over a two-day period, the storm followed a path just off the southeast U.S. coastline. Buoyed by record-setting atmospheric moisture, Matthew deluged much of coastline along its track with torrential rains.

Before reaching the U.S., Hurricane Matthew had already caused significant damage and loss of life in Haiti, Cuba, and The Bahamas.

Tom Sabbatelli, product manager in the RMS hurricane modeling team, said:

“In the immediate aftermath of a hurricane, there can exist a degree of uncertainty around loss estimates. 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. Even small variations in our ten wind and storm surge reconstructions over the wide swaths of exposure can have a significant impact on the estimated loss.”

The RMS insured loss estimates for Hurricane Matthew are based upon RMS industry exposure databases, representing insured hurricane exposure in the U.S. and the Caribbean. While informed by analyses performed against the 2011 RMS U.S. and Caribbean Hurricane IEDs, this estimate primarily considers analyses performed against the pre-release version of the 2017 RMS U.S. Hurricane IED, due for release in Spring 2017.

Region

Loss Estimate in U.S.$ Millions

Storm Surge Contribution

in U.S.$ Millions

United States

1,500–5,000

300–1,000

Florida

500–2,000

100–500

Southeast U.S. (Georgia, South Carolina, North Carolina)

1,000–3,000

200–500

Caribbean

1,000–3,000

100–200

The Bahamas

1,000–3,000

100–200

Cuba

< 100

Haiti

< 100

The above table provides the RMS best industry loss estimate by country and U.S. state, including approximate contributions from storm surge damage and are based on the range of losses from the RMS ensemble footprints in version 16.0 of its North Atlantic Hurricane Models.

Source: RMS

Flood Summary

Last updated: October 27, 2016
Event
Hurricane Matthew, Caribbean and USA, September to October 2016
Date
September 28, 2016
Type
Flash flood, River flood, Storm surge
Cause
Extreme rainfall

Locations

A - Castries, Saint Lucia (Saint Lucia)
B - Layou, St Vincent (Saint Vincent and the Grenadines)
C - Les Cayes (Haiti)
D - Les Anglais (Haiti)
E - Tiburon (Haiti)
F - Jérémie (Haiti)
G - Santo Domingo (Dominican Republic)
H - New Providence, Bahamas (Bahamas)
I - St Augustine (United States)
J - Savannah (United States)
K - Charleston (United States)
L - Fayetteville (United States)
M - Lumberton

Magnitude

Rainfall level
319.9 mm in 24 hours
Hewanorra, Saint Lucia - September 28 to September 29, 2016
Rainfall level
134.1 mm in 24 hours
Vigie, Saint Lucia - September 28 to September 29, 2016
Rainfall level
233.9 mm in 24 hours
Santo Domingo, Dominican Republic - October 2 to October 3, 2016
Rainfall level
355 mm in 24 hours
Fayetteville, NC, United States - October 8 to October 9, 2016

Damages

Fatalities
1 person
Layou, St Vincent - September 28 to September 29, 2016
Fatalities
546 people
Haiti - October 3 to October 12, 2016
Fatalities
6 people
Dominican Republic - October 3 to October 5, 2016
Evacuated
175,509
Haiti - October 3 to October 11, 2016
224 shelters set up to accommodate those displaced.
Evacuated
35,019
Dominican Republic - October 3 to October 5, 2016
Evacuated
900 people
Jamaica - October 1 to October 6, 2016
900 displaced staying in shelters.
Evacuated
1,079,000
Cuba - October 3 to October 6, 2016
317,000 have been evacuated to designated protective shelters and 944,000 are staying in homes of relatives or friends.
Rescued
30 people
New Providence Island, Bahamas - October 6 to October 7, 2016
Fatalities
37 people
USA - October 7 to October 10, 2016
Deaths in North Carolina (26), South Carolina (4) Georgia (3) and Florida (4) have been attributed to the storm.