RMS issues Hurricane Maria damage estimate
RMS has said that it has estimated that the insured loss from Hurricane Maria will be between $15 and $30 billion.
“The Caribbean was hit hard by Maria, but Puerto Rico bore the brunt of insured damage,” said Michael Young, RMS head of product management for US climate models. “It may have avoided the worst impacts of Hurricane Irma at the start of September, which only glanced the island. However, with Maria, Puerto Rico suffered a direct and costly hit. But although there is over $500 billion of exposure on Puerto Rico, significant amounts of property damage will not be insured, and this will limit industry losses.”
According to RMS, the estimate represents the insured losses associated with wind, storm surge and inland flood damage across the Caribbean, with Puerto Rico and Dominica suffering the most widespread destruction.
The estimate includes property damage and business interruption to residential, commercial and industrial lines of business, with the vast majority of losses caused by wind damage. The RMS analysis also reflects post-event loss amplification.
Furthermore, RMS has had detailed discussions with insurers on the island, who report that in those urban areas with higher rates of insurance penetration, structural damage may be more limited. Instead, the most catastrophic impacts may have been in areas with very low insurance coverage, according to these sources. This is one reason why RMS expects insured losses from Hurricane Maria to be significantly lower than overall economic damages, which will be between $30 and $60 billion across the Caribbean.
However, there are also amplifying effects on industry losses. Hurricane Maria severely impacted power supplies, with outages that will last months. Fuel for electricity generators is running short. As well as being a humanitarian concern, this will have implications for Puerto Rico’s economy with significant business interruption, including to the island’s important pharmaceutical industry. Flooding has also washed away roads and bridges.
“RMS clients are reporting that structural damage on Puerto Rico of key industrial complexes is relatively limited,” said Young. “But the electricity shortages, significant infrastructure disruption, and possible labour shortages, are expected to amplify direct losses by almost 50 per cent, which is reflected in our estimate.”
In addition, RMS expects there may be shortages of claims adjustors and reconstruction workers, following the dual impact of earlier Hurricanes Irma and Harvey on the Caribbean and the U.S. mainland. Along with the significant interruption of transmission and distribution systems this may lead to a unique “Super Cat” situation.
Hurricane Maria was the thirteenth named storm of the 2017 North Atlantic hurricane season, first making landfall over Dominica on September 19 as a category 5 hurricane, maintaining its intensity as it tracked across the Caribbean near to Guadeloupe, Martinique and the US Virgin Islands before weakening to category 4 strength as it made landfall in Puerto Rico.
