Reinsurance News

Hurricane Barry insured losses will not exceed $500mn: RMS

19th July 2019 - Author: Matt Sheehan

Insurance and reinsurance industry losses from Hurricane Barry, which made landfall in Louisiana on Saturday, will not exceed $500 million, according to estimates from catastrophe risk modeller RMS.

Barry approaching Louisiana on July 12th. Source: NOAA

The estimate represents losses associated with wind, storm surge, and inland flood damage, including losses to the National Flood Insurance Program (NFIP).

It compares with an earlier estimate from Karen Clark & Company (KCC), who pegged Barry losses at close to $300 million, excluding NFIP losses.

RMS said that it expects NFIP losses to represent approximately half of the total insured loss estimate.

Louisiana has the third highest number of NFIP policies-in-force in the U.S., it noted, many of which cover areas impacted by storm surge or inland flooding from Barry.

Barry was the second named storm of the 2019 North Atlantic hurricane season. It made landfall as a Category 1 hurricane with maximum sustained winds of 75mph before shortly dropping back into tropical storm territory.

Flood damage is expected to be the major driver of loss from Barry, due to its slow-moving pace, which resulted in heavy rainfall and storm surge in impacted regions.

Analysts at TigerRisk argued last week that the risk posed by stalled hurricanes, such as Barry, appears to be growing.

“Wind and storm surge-driven losses for Barry are expected to be in line with losses projected prior to landfall,” said Jeff Waters, Senior Product Manager of the RMS North Atlantic Hurricane Models.

“The storm made landfall in Louisiana as a weak Category 1 hurricane, then quickly weakened due to its vulnerable structure,” he explained. “Sustained hurricane-force winds were only experienced along a small portion of the southern Louisiana coastline.”

Holly Widen, Product Manager, Global Climate at RMS, also commented: “Although, at first, Barry did not seem to generate the forecasted severe rainfall, it ended up producing more than 23 inches in southwest Louisiana and 13 to 14 inches in portions of Mississippi and Arkansas; the latter of which is now the fifth state to set a new tropical storm rainfall record in the past two years.”

“The heavy rainfall resulted in flooding across portions of the lower Mississippi Valley, albeit in less populated areas,” she added. “Thus, flood-driven losses are now expected to be lower than initially anticipated.”

The RMS U.S. Inland Flood High Definition (HD) Model utilised observed rainfall accumulations for Barry to simulate the runoff, river discharge, and consequent flood inundation across the impacted region.

Included in this estimate are insured losses from property damage and business interruption from wind, storm surge-driven coastal flooding, together with inland flooding to residential, commercial, industrial, and automobile lines of business.

Storm surge losses include the impact of coverage leakage, an escalation in claims severity for wind-only policies in instances where wind and water hazards co-exist for residential lines of business.

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