Major hurricane Ian’s impacts to drive a privately insured loss $63 bn

Major hurricane Ian’s impacts are expected to drive a privately insured loss of around $63 billion, the majority of which is from the United States, according to Karen Clark & Company.

Only around $200 million of this loss estimate will be from the Caribbean, meaning that close to $63 billion will be from the US alone, with the majority of that coming from Florida.

The US loss estimate is based on an estimate of insured wind, storm surge and inland flood losses from major hurricane Ian.

Karen Clark & Company (KCC) cautioned that the industry loss will be a particularly complex one for insurance and reinsurance market interests.

“Hurricane Ian will be a challenging storm for insurers due to the tremendous amount of coastal flooding and the unique nature of the Florida market with respect to a likely high proportion of litigated claims,” KCC explained.

Major hurricane Ian’s impacts to drive a privately insured loss $63 bn

KCC’s US insurance industry loss estimate includes:

  • Insured loss to residential, commercial, and industrial properties and to autos
  • Building, contents, and time element losses
  • Privately insured loss from wind, storm surge, and inland flooding
  • Estimated demand surge
  • Estimated impacts of excess litigation in Florida

But, the US figure excludes:

  • NFIP losses
  • Boats and offshore properties
  • Uninsured flood losses
  • Uninsured wind losses (e.g. loss under deductibles)

As KCC’s hurricane Ian industry loss estimate does not include any losses due for the National Flood Insurance Program, it does not contemplate potential additional private reinsurance market losses, should the NFIP need to make recoveries from its reinsurance and catastrophe bond tower.

KCC has loaded its estimate for potential litigation, a key issue for Florida’s insurance marketplace and so a possible inflator of claims from hurricane Ian.

KCC experts have analyzed the trends in litigated claims in Florida and other states. While legislative and policy changes should help to reduce the proportion of litigated claims relative to Hurricane Irma, the large proportion of properties with both wind and water damage may induce more litigation.

The KCC estimate includes a comparable proportion of excess litigation as occurred in Hurricane Irma.

In nominal dollars, Hurricane Ian is anticipated to be the largest hurricane loss in Florida history.

KCC estimates that economic losses from hurricane Ian will rise well above $100 billion, including uninsured properties, damage to infrastructure, and other cleanup and recovery costs.

by Yana Keller