Ian will change Florida insurance, says RMS

04-10-2022

Ian will change Florida insurance, says RMS

Mohsen Rahnama, chief risk modelling officer, RMS.

Hurricane Ian is expected to redraw the insurance market landscape in Florida and some of the claims’ closers will take more than a year due to potential litigation, according to Mohsen Rahnama, chief risk modelling officer at RMS.

“There is a challenge in reconstructing the wind footprint for Hurricane Ian, as there were multiple failures of wind stations recording results due to high windspeed.  Our event response (ER) team is working hard using the available data to finalise the footprint for Florida, including the second landfall in South Carolina,” Rahnama said.

The major hurricane is a historical event and very complex.

“Category 4 event with a maximum 150 miles per windspeed and a 50-kilometer radius, massive record storm surge, and inland flood, all points to Ian most likely being one of the costliest events in Florida,” he said.

The split of losses between wind and storm surge will be “contentious”, he said, and also understanding what portion of loss will go to primary, reinsurance layers, and retro, as well as understanding what will be covered by National Flood Insurance Program.

Claims leakage will focus on factors from loss amplification due to constraints in rebuilding supplies and contractors, Rahnama said, through to “another big wildcard” of inflation, which will “percolate” through the system in several ways.

Rahnama continued: “The current inflation situation pre-Hurricane Ian and any shortage of materials and qualified contractors in Florida will amplify the repair cost. I believe the repair will be in multiple stages, starting with a quick functional repair followed by the major repair–which requires a permit and qualified contractors. Also, the considerable infrastructure damage from Ian will slow down the recovery and exacerbate the repair time and losses, especially for islands disconnected from the mainland due to bridges and piers damages. We expect the full recovery takes a few years.”

He concluded: “As shown in the recent events, particularly Hurricane Irma in 2017 where many cases ended up in the litigation process, we saw increases in claims cost.  For Ian, we expect that some of the claims’ closers will take more than a year due to potential litigation. Basically, I believe this event will change the Florida insurance market landscape.”

Bermuda Re