Reinsurance News

Hawaii braces for $8bn property damage as Hurricane Lane approaches

23rd August 2018 - Author: Matt Sheehan

More than 48,000 homes are threatened with flood damage as Hurricane Lane bears down on the U.S state of Hawaii, with total reconstruction costs expected to total around $8 billion, according to catastrophe risk modelling specialist CoreLogic.

Hurricane Lane Forecast PathWhile unlikely to make a direct landfall, Hurricane Lane became a strong Category 5 hurricane on its route towards Hawaii, and threatens the region with sustained winds of 155mph and heavy rainfall.

Lane has since been downgraded to a Category 4 hurricane and is expected to continue to weaken as it makes its approach, according to predictions from the National Oceanic and Atmospheric Administration (NOAA).

However, hurricane force winds currently extend outwards from the center of Hurricane Lane by up to 40 miles, while tropical storm force winds extend up to 140 miles, meaning up to 20 inches (50cm) of rainfall and strong winds are likely to be experienced across the Hawaiian islands in the coming days.

Authorities fear Lane may cause flash flooding, landslides, and mudslides even in areas not usually prone to flooding, while rip currents, rough surf, and waterspouts are also a concern for properties along the coast.

Stratumn, by SIA Partners

Flooding is also expected to be exacerbated by the topography of Hawaii, which includes mountainous terrain and steep slopes, as well as less robust buildings.

Impact Forecasting, the risk modelling unit of re/insurance broker Aon, warned: “Do not focus on the exact forecast track for Lane, as life-threatening weather conditions extend well away from the center of the hurricane, and significant impacts could be felt on any of the islands.”

CoreLogic’s report, which modelled a worst-case scenario exclusively for single-family residential properties impacted by Lane, said that the island of Oahu was most at risk, with 36,083 homes at Extreme or Very High risk of flood damage, totalling over $5 billion in potential reconstruction cost value (RCV).

Meanwhile, the island of Hawaii has 1,881 homes at Extreme risk, totalling $424 billion in RCV, while Kauai has 3,510 homes at Extreme risk, totalling $923 million, and Maui has 7,143 homes at Extreme risk, totalling $1 billion.

Analysts from Buckingham Research have shown that State Farm, Tokio Marine, Berkshire Hathaway, USAA, Heritage Insurance Holdings, Allstate, Liberty Mutual, DB Insurance, AIG and Island Insurance make up the 10 most exposed underwriters of primary catastrophe business in the region.

Allianz, MS&AD, Chubb, Farmers, Zurich, and RLI Corp also feature in the top 20 list, while on a pure reinsurance basis, Korean Re is the most exposed, followed by the National Flood Insurance Program (NFIP), HDI, Swiss Re, Everest Re, Allianz, Alleghany, Berkshire Hathaway and ILS specialist Aeolus.

Toa Re, Fairfax, AXIS Capital, Factory Mutual, SCOR and Munich Re also rank among the most exposed reinsurers to losses resulting from Hurricane Lane.

According to the National Weather Service, only four named storms have made landfall in Hawaii since 1959, with 1992’s Hurricane Iniki being the largest recent storm, causing insured losses of $1.2 billion and economic damage of more than $3 billion.

Earlier in August, Category 4 Hurricane Hector also passed by the islands, although not as close as Lane, while the Aloha state also continues to suffer from serious volcanic eruptions this summer.

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