Hurricane Harvey: Insurance sector set to slapped with bill in excess of $15bn, catastrophe boffins calculate

by

Hurricane Harvey made two landfalls along the Gulf Coast in Texas and Louisiana (Source: Getty)

Insurers are facing a $15.4bn (£11.9bn) loss from Hurricane Harvey, according to the latest research from catastrophe risk modelling experts.

With the extent of the devastation becoming clearer, economic loss estimates earlier today topped $190bn; more than the cost of hurricanes Sandy and Katrina put together.

The US government's National Flood Insurance Programme (NFIP) – similar to Flood Re in the UK – will likely pick up the majority of the bill. However, commercial insurance for damage and business interruption will fall on the wider insurance sector.

Boston-based Karen Clark & Co today said insurers will pick up the tab for $12.4bn of inland flood losses, $2.5bn of wind losses and $500m of storm surge losses.

Read more: Hurricane Harvey will cost more than Sandy and Katrina

While the total of $15.4bn is lower than earlier estimates by Morgan Stanley of $25bn, the flood losses element is higher than previously thought.

Nudge up

On Tuesday, Peel Hunt analyst Andreas van Embden predicted insurers were facing losses of anywhere between $4bn and $15bn.

“As the storm drags on, my numbers will nudge up," he said. "The longer businesses stand under water, the more damage there is."

While experts have predicted the insurance costs will likely arrest a softening of catastrophe insurance premiums, the economic losses are not at the level to return more robust pricing, Panmure Gordon's head of research Barrie Cornes said earlier this week. He said:

It needs a $300bn or $400bn to remove enough capacity, enough money out of the insurance system to enable rates to move forward.

Read more: Hurricane Harvey flood bill keeps on rising as insurers grapple with damage

Hurricane Harvey – fast facts

  • It is the first Category Four hurricane to make landfall in the US since Hurricane Charley in 2004)
  • Record rainfalls in excess of 50 inches in parts of Texas were exacerbated by slow storm motion and duration of the storm
  • Intensified to a Category Four hurricane with wind speeds reaching 130 mph just before landfall
  • Made two landfalls along the Gulf Coast in Texas and Louisiana

Source: Karen Clark & Co

 

 

Tags: Insurance