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Insured Florence losses as high as $5bn: RMS

25th September 2018 - Author: Charlie Wood

Global catastrophe risk modeller RMS estimates an insured loss from hurricane Florence of between $2.8 billion and $5 billion; a figure that includes a $800 million to $1.2 billion loss for the National Flood Insurance Program.

hurricane-florence-nasaThe estimate includes losses associated with wind, storm surge, and inland flood damage across North Carolina, South Carolina, and Virginia.

Additional factors such as post-event loss amplification, property damage and business interruption caused by wind, coastal flooding, and inland flooding to residential, commercial, industrial, and automobile lines of business are also included.

RMS expects 70% of flood losses to be uninsured due to the prolonged, record-breaking rainfall.

Considering uninsured wind, storm surge, and rainfall-driven flood losses in the U.S, RMS estimates the overall economic loss from Florence to fall between $6 billion and $11 billion.

Prolonged recovery efforts, damaged infrastructure in the Carolinas and delays to the re-opening of business are all factors expected to contribute to a high post loss amplification.

The breadth of impact across the southeast, particularly from inland flooding, may produce a large volume of claims for insurers to address, leading to potential claims inflation.

RMS says it is also possible that Assignment of Benefits issues, combined with an aggressive legal environment, to contribute to a heightened loss amplification status within the state.

“We were fortunate that Florence weakened considerably before making landfall as a Category 1 hurricane, said Mohsen Rahnama, Chief Risk Modeling Officer, RMS.

“While wind-driven damages will still be sizeable, the story of this storm is the flood impacts. Florence’s slow moving nature brought historic rainfall and flooding to the Carolinas.”

Onsite surveying was used in combination with RMS’ North Atlantic Hurricane Models, RMS ensemble footprints and the upcoming RMS U.S. Inland Flood High Definition (HD) Model to simulate these estimates.

“Florence is yet another large inland flood event that exposes the protection gap for flood insurance in the U.S. NFIP take-up rates are less than 1 percent for the vast majority of non-coastal counties in the North and South Carolinas,” added Rahnama.

“Thus, we expect much of the losses in interior portions of the region to be largely uninsured.”

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