Global catastrophe risk modeller, RMS, has estimated that insured losses from the impacts of hurricane Maria will be between $15 billion and $30 billion, with the majority of the loss being driven by wind damage.
RMS’ figure includes damages from wind, storm surge and inland flooding across parts of the Caribbean, with Puerto Rico and Dominica experiencing the most devastation from hurricane Maria.
Michael Young, RMS head of product management for U.S. climate models, commented; “The Caribbean was hit hard by Maria, but Puerto Rico bore the brunt of insured damage. It may have avoided the worst impacts of Hurricane Irma at the start of September, which only glanced the island. However, with Maria, Puerto Rico suffered a direct and costly hit.
“But although there is over $500 billion of exposure on Puerto Rico, the insurance penetration rate is only around 60 per cent. Thus, significant amounts of property damage will not be insured, and this will limit industry losses.”
According to the catastrophe risk modeller, after discussions with local insurance companies it appears areas with higher insurance penetration experienced less damage than areas with extremely low levels of insurance take-up.
As a result, RMS estimates the economic loss from Maria to between $30 billion and $60 billion, further highlighting the protection gap (disparity between economic and insured losses post-event) across the world, which is particularly evident in poorer regions.
RMS’ estimates include property damage and business interruption to residential, commercial and industrial business lines, and adds there’s also amplifying effects on the industry loss.
“RMS clients are reporting that structural damage on Puerto Rico of key industrial complexes is relatively limited. But the electricity shortages, significant infrastructure disruption, and possible labour shortages, are expected to amplify direct losses by almost 50 per cent, which is reflected in our estimate,” continued Young.
The firm also expects there to be a shortage of claims adjustors and reconstruction workers, in light of the impacts of hurricanes Harvey and Irma in previous weeks. Furthermore, RMS warns of substantial interruption of transmission and distribution systems, which it says could create “a unique “Super Cat” situation.”
Wind measuring stations failed during the event as a result of damages, which RMS notes as a hindrance to assessing the loss.
Young explained how the RMS HWind system enabled the firm to overcome this challenge.
“HWind draws upon tens of thousands of wind observations from over 30 land, sea, satellite and airborne data sources. It allowed RMS to estimate maximum sustained winds of 130 mph (209 km/h) as Hurricane Maria made landfall on Puerto Rico, enabling an industry loss estimate based on the most comprehensive data,” said Young.
The RMS insured loss total of up to $30 billion is far lower than the $85 billion provided by AIR Worldwide recently, and perhaps underlines the complexity and uncertainty of the damages caused by hurricane Maria, the thirteenth named storm of the 2017 North Atlantic hurricane season.