Reinsurance News

Onshore U.S. insured losses from Hurricane Zeta seen at up to $5bn by RMS

4th November 2020 - Author: Luke Gallin

Total onshore U.S. insurance and reinsurance industry losses from Hurricane Zeta are estimated to be between USD 3 billion and USD 5 billion, according to catastrophe risk modeller RMS.

Hurricane Zeta, which first made landfall in Mexico’s Yucatan Peninsula as a Category 1 storm on October 24th, and again in the US as a Category 2 storm on October 28th, was the fifth named storm and the third hurricane to make landfall in Louisiana this season.

RMS’ estimate includes wind and storm surge losses across the impacted states, including Louisiana and Mississippi, based on analysis of RMS ensemble footprints Version 18.1 of the RMS North Atlantic Hurricane Model.

Of the USD 3 to USD 5 billion insured loss range for the U.S., RMS attributes between USD 2.8 to USD 4.7 billion to wind and surge losses, and between USD 200 – USD 300 million of losses to the National Flood Insurance Program (NFIP).

Additionally, says the firm, the estimate includes a 5% reduction in insured onshore losses due to the cumulative impacts of Hurricane Sally, which hit much of the same region as Zeta earlier in the extremely active 2020 Atlantic Hurricane season.

In Mexico, RMS has said that it expects insured losses from Zeta to be minimal but warns that overall insured losses only account for a fraction of the total economic loss, particularly in Mexico where insurance penetration is much lower than in the U.S.

Of course, the storm also impacted offshore platforms, rigs, and pipelines in the Gulf of Mexico on its approach, and RMS estimates that insured losses here will not exceed USD 500 million from wind and wave-drive damages.

“We do expect some overlap between Zeta and Sally as the industry settles losses from these two events, but not to the degree of Delta and Laura a few weeks ago. Our Development Team found that approximately 20% of zip codes impacted by Zeta were also impacted by Sally, particularly at lower wind speeds. The overlap in the worst-affected areas of these two storms appears to be minimal. Thus, we expect a smaller loss reduction factor compared to the Delta and Laura events, largely attributed to structures in the overlapping region that sustained some, but not total damage from Sally, followed by additional damage from Zeta,” said Jeff Waters, Senior Product Manager, RMS North Atlantic Hurricane Models.

The estimate from RMS follows that of Karen Clark & Company (KCC), which estimated that the insured loss to onshore properties caused by Hurricane Zeta will be close to USD 4.4 billion. AIR has also provided an estimated range of USD 1.5 billion to USD 3.5 billion for insured losses from Hurricane Zeta’s winds and storm surge.

“Despite encountering cooler waters and strong wind shear in its approach, Zeta managed to intensify before making landfall in Louisiana, nearly achieving major hurricane status. The storm’s fast forward motion–common for events that occur later in the season–reduced material water-driven impacts along the Gulf coast. However, that rapid movement brought hurricane-force winds well inland before Zeta finally weakened. In this unprecedented 2020 season, Zeta is another reminder that the season is far from over,” said Pete Dailey, Vice President, Model Development.

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