Hurricane Otis may be Mexico’s most expensive natural disaster

Hurricane Otis is likely to surpass $2.7 billion in insured losses, according to the chief scientist of Gallagher Re.

Steve Bowen said in a LinkedIn post that Otis, which came ashore last week near Acapulco, may be the costliest natural catastrophe ever recorded in Mexico.

“The Mexican insurance industry is facing an expensive event with initial expectations of this being a multi-billion-dollar event and likely surpassing the insured costs in Mexico from Wilma in 2005 ($2.7 billion in today's dollars),” Bowen said.

“Footage from Acapulco shows extensive and widespread catastrophic damage to coastal commercial and residential real estate that will take years to rebuild. Beyond the physical damage, the scope of major damage to regional infrastructure is expected to bring prolonged business interruption.

“There has also been significant damage to regional crops. All of this will lead to high dollar costs and, sadly, extended disruption to local residents.”

Bowen said Otis made landfall as a Category 5 storm, noting: “With a population of at least 1 million people, it marked one of the largest population centres ever directly impacted by a Category 5 storm since Haiyan (Philippines; 2013) or Andrew (1992).”

He said the storm underwent a 24-hour rapid intensification which caught the city by surprise.

Bowen said surface waters were extremely warm which contributed to the rapid intensification.

“Such behaviour is entirely consistent with climate change research and the expectation of a higher percentage of high-end storms,” he said. “More ocean heat - at the surface and at deeper depths - provides exponentially more energy for storms to use as fuel.

“Mexico does not have a level of building codes to withstand coastal wind speeds experienced during Otis,” Bowen added. “While Acapulco has seen improved building codes for seismic activity, that has not translated to modernized wind codes. This left windows, roofs, and siding especially vulnerable to Otis' intensity.

Bowen said more efforts needed to be made to mitigate the risk of high intensity storms.

“It is becoming less surprising to scientists to see these rapid intensification events. What remains an increasingly growing concern is more of these scenarios occurring to the point of landfall.

“The rise in global coastal populations combined with the ongoing evolution of tropical cyclone behaviour drives the potential for more damaging and expensive storms.

“We need to be making smarter decisions on how we’re better preparing for this growing risk,” he said.  “This includes a smarter approach to how and where we build, making strategic investments around infrastructure modernisation, and ensuring more financial protection for citizens in the aftermath of events.”