Hurricane Dorian is likely to drive an insured loss of between $3.5 billion and $6.5 billion in the Caribbean, according to estimates from risk modelling and analytics firm RMS.
The estimate represents insured losses from wind and storm surge damage across the Caribbean, but most notably in the Bahamas, parts of which were devasted by the storm.
RMS believes that nearly all of the industry loss in the Caribbean will come from the Bahamas, and in particular from Dorian’s impact on Grand Bahama and the Abaco Islands.
The loss figure from RMS is significantly higher than the estimate released by catastrophe risk modelling firm AIR Worldwide last week, which put insured losses in the Caribbean at between $1.5 billion and $3 billion.
RMS said its loss estimate reflects property damage and business interruption caused by winds and storm surge-driven coastal flooding to residential, commercial, industrial, marine and automobile lines of business, plus factors for both post-event loss amplification (PLA) and non-modelled losses.
“There is a high degree of uncertainty on the potential impact of post-event loss amplification from this event,” said Jeff Waters, Senior Product Manager, RMS North Atlantic Hurricane Models.
“Nevertheless, we expect PLA in the Bahamas to be significant due to constrained access to the islands and infrastructure damage,” he explained. “Port closures, damaged roads, and severe damage to the airport will make it difficult to deliver the necessary labor and materials to impacted areas.”
“It will also limit the ability of residents and business owners to return to damaged homes and buildings. Consequently, cost of materials is expected to inflate, and repairs could be prolonged, both of which are expected to amplify the cost of the claims from this event.”
Hurricane Dorian was the fourth named storm of the 2019 North Atlantic hurricane season and the first major hurricane of the season.
It made landfall on September 1 on the Abaco Islands in the Bahamas as a Category 5 hurricane with maximum sustained wind speeds of up to 185 mph, before stalling over the northern Bahamas for more than 36 hours.
This makes Dorian by far the strongest hurricane to have ever made landfall in the Bahamas, and reports suggest there has been widespread devastation in the region.
The International Red Cross believes that 45% of the homes on Grand Bahama and the Abacos Islands have been severely damaged or destroyed, representing some 13,000 properties.
Additionally, RMS expects business interruption losses to be significant following the storm, as hotels and resorts comprise a large portion of the overall commercial exposure in the two most heavily impacted islands.
Peter Dailey, Vice President, Model Development at RMS, also commented: “Insured losses in the Bahamas are also expected to settle over a longer period than in a typical Caribbean hurricane given an expected spike in demand for claims adjusters, many of whom will be unable to inspect properties or even access the two main affected islands for some time.”