Hurricane Dorian has ramped up to Category 5, reaching wind speeds of more than 180mph over the weekend, but the outlook for the US has improved significantly, with forecasts now showing that the storm will stay just offshore as it moves up the east coast.
Dorian, which had previously been forecast to make landfall in Florida early this week at Cat 4 strength, has intensified beyond expectations over the weekend, becoming the second strongest Atlantic hurricane on record, behind Hurricane Allen in 1980.
It is currently pummelling the Bahamas as it crawls west at just 1mph, with catastrophic winds and “life-threatening storm surge” of up to 23 feet causing widespread destruction across the Abaco Islands and Grand Bahama Island.
However, the threat to the insurance and reinsurance industry appears to have been reduced significantly, with a major landfall along on the east coast of the US now looking less likely.
Late last week, the most likely scenario put Dorian landfalling in the high-value area around West Palm Beach in Florida, before turning north and tracking up across the state, causing damage across a wide area.
Analysts at Credit Suisse put re/insurance industry losses in the range of $10 billion to $30 billion, based on this forecast.
Despite the improved outlook, hurricane force winds extend 45 miles out from Dorian’s centre, meaning large areas of the US coastline could still face dangerous winds and storm surge.
Governor of Florida Ron DeSantis warned people not to become complacent following the change in the storm’s predicted path, and told residents: “This storm at this magnitude could really cause massive destruction.”
South Carolina also issued a mandatory evacuation of its entire coast, affecting 830,000 people, with Georgia shortly following suit.
Keefe, Bruyette & Woods (KBW), meanwhile, has suggested that the majority of losses from Hurricane Dorian in Florida could be borne by reinsurers, rather than the primary insurance market.
Additionally, with Dorian forecast to hug the US east coast all through this week, there is still a good chance that the storm could change its path again and move west over part of the US.
The latest data from the National Hurricane Center (NHC) shows that Dorian will still be at Cat 2 status on Friday when it will be roughly level with Virginia, but moving progressively further away from the coast.
If Dorian’s strength is maintained this long, a large section of the US coast will be at risk of damaging winds, meaning that the storm could still become a major event for the re/insurance industry.
There is also the concern that Dorian could slow down further and even stall, which could bring prolonged wind damage, storm surge and heavy rainfall to any nearby areas, with an increased risk of flash flooding.
While the impact in the Bahamas won’t be as troubling to the market, due to its relatively low insurance penetration, it’s still important to note the devastating impact to lives and communities that Dorian will likely have.
“A prolonged period of catastrophic winds and storm surge will affect the Abaco Islands and Grand Bahama Island for several more hours,” the latest statement from the NHC read. “Everyone there should take immediate shelter and not venture into the eye.”
It also warned of heavy rains capable of producing life-threatening flash floods across northern portions of the Bahamas and coastal sections of the southeast and lower mid-Atlantic regions of the US.
In terms of the US, the NHC said: “Life-threatening storm surges and dangerous hurricane-force winds are expected along portions of the Florida east coast through mid-week, and storm surge and hurricane warnings are in effect. Only a slight deviation to the left of the official forecast would bring the core of Dorian near or over the Florida east coast.”
“There is an increasing likelihood of strong winds and dangerous storm surge along the coasts of Georgia, South Carolina, and North Carolina later this week,” it added.