21 September 2017News

RMS releases latest Irma loss estimate

RMS has released an estimate of the insured loss from Hurricane Irma, stating that the total will be between $35 and $55 billion.

According to the modelling company the estimate represents the insured losses associated with wind, storm surge, and inland flood damage across Florida and the southeast United States (including losses to the National Flood Insurance Program). It also includes insured loss associated with wind and storm surge in the Caribbean.

Included in the industry estimate are losses to the National Flood Insurance Program of $2.5 to $5.5 billion that will add to the $7-10 billion estimated from Hurricane Harvey that occurred two weeks earlier.

“In the US, the losses from Irma will be significant and many communities have been severely disrupted. But had the hurricane made a direct impact on Tampa, the biggest city on Florida’s west coast, the losses would have been much higher,” said Michael Young, RMS head of product management for US climate models. “However, while the majority of Irma’s losses will come from Florida, it’s important not to overlook the Caribbean where several islands were devastated.”

RMS expects both uninsured rainfall-driven flood losses in the US, and uninsured wind and storm surge losses in the Caribbean to be significant. Therefore, the overall economic losses will be substantially higher, according to the RMS estimate: between $60 and $95 billion.

According to RMS one key driver of uncertainty in the Florida loss will be the extent and impact of demand surge from insureds, as Hurricane Irma affected nearly the entire peninsula with huge amounts of property exposure.

Hurricane Irma was the eighth named storm of the 2017 North Atlantic hurricane season. It was the first major hurricane (Category 3 or greater) to make landfall in Florida since Hurricane Wilma in 2005.  It made landfall first in the Florida Keys on September 10, and later the same day at Marco Island, south of Naples. Prior to reaching the US mainland, Irma hit several Caribbean islands, at times with sustained winds that according to some estimates reached 188 mph, making it one of the most intense Category 5 intensity storms on the Saffir-Simpson Hurricane Wind Scale.

RMS also pointed out that the Caribbean has a lower rate of insurance take-up than the US and therefore insured losses will constitute a fraction of the region’s total economic losses. Nonetheless, RMS estimates insured wind losses will be very significant for the Caribbean: between $10 and $20 billion, with five islands catastrophically impacted and high loss ratios.