Insured Losses in Caribbean from Hurricane Maria Estimated at $40B-$85B: AIR

September 26, 2017

Industry insured losses for Hurricane Maria in the Caribbean will be between US$40 billion and US$85 billion, according to catastrophe modeling firm AIR Worldwide.

Puerto Rico alone accounts for more than 85 percent of the loss, said Boston-based AIR, which is a unit of Verisk.

Hurricane Maria compounded the damage done in the central Caribbean region by Hurricane Irma two weeks ago, said AIR, noting that Maria spared a few islands devastated by Irma, but brought additional destruction to others, and wrecked some locations that had escaped Irma’s wrath.

AIR said its estimates include “demand surge,” which is the increase in the cost of labor and materials often observed after major catastrophes. Demand surge increases the cost of rebuilding and ultimately results in higher insured losses than would otherwise be the case.

Demand surge arises from shortages and potential constraints in the movement of labor, and it can be exacerbated when multiple disasters occur in a short timeframe, as is the case with hurricanes Harvey, Irma and Maria, AIR explained.

AIR’s modeled insured loss estimates also include insured physical damage to onshore property (residential, commercial, and industrial) and autos due to wind and precipitation-induced flooding; insured loss to contents; losses due to business interruption; losses to industrial facilities, and additional living expenses (ALE) for residential claims.

On the other hand, AIR said its estimates do not include losses to infrastructure; losses from hazardous waste cleanup, vandalism, or civil commotion whether directly or indirectly caused by the event; losses to offshore properties, pleasure boats, and marine craft; losses resulting from the compromise of existing defenses (for example, levees), and losses to uninsured properties.

Recounting Hurricane Maria’s path of devastation, AIR said that Hurricane Maria slammed into Dominica on Tuesday, Sept. 19 as a Category 5 storm, where it caused widespread damage and triggered flooding in adjacent Guadeloupe. It weakened briefly to a Category 4, then intensified again to Category 5 as it cut west-northwest over the warm waters of the northeastern Caribbean Sea. The eyewall brushed the western edge of St. Croix in the Virgin Islands on Tuesday night, bringing storm surge and large waves to southern shores.

Maria was downgraded slightly to Category 4 before it made landfall on Puerto Rico near the town of Yabucoa at 6:15 a.m. ET, Wednesday, Sept. 20 with maximum sustained winds of 155 mph, said AIR, noting that this was Puerto Rico’s first direct landfall from a Category 4 tropical cyclone since the notorious San Ciprian hurricane in 1932.

Maria lost some organization as it interacted with Puerto Rico’s mountains but brought a storm surge anticipated to be 6 to 9 feet in some areas and inundated the country with 12 to 18 inches of rain, with higher amounts in some locations. Maintaining its track, it then passed close offshore of the northeast coast of Hispaniola delivering heavy precipitation, Category 3 winds, and storm surge to the northern Dominican Republic.

AIR said that the Caribbean islands hit by Hurricane Maria and Hurricane Irma are in the early stages of a very lengthy recovery period.

“More than 3 million people in Puerto Rico, for example, remain without electricity, drinking water, and gas; other essentials are in short supply,” added AIR in its update. With 95 percent of cell phone towers reportedly toppled, communication is difficult. Further, AIR said, many towns have been cut off by landslides and floods.

As heavy precipitation continued, the dam on the Guajataca River was significantly compromised and was deemed in danger of an imminent break Friday afternoon. Some 70,000 people downstream were advised to evacuate immediately. The dam is an earthen structure built in 1929 to provide drinking water, irrigation, and power generation, said AIR, explaining that the dam has not failed, but remains in danger of doing so.

Maria’s Path North

Hurricane Maria is expected to continue moving north for the next several days, slowing and weakening as it goes, and staying well east of the southeast coast of the United States. The storm will likely bring coastal flooding, high winds and rain to parts of the North Carolina coast and Virginia Tidewater through Wednesday. It is expected to have become a tropical storm by Tuesday night, to turn toward the northeast by Thursday, and to dissipate mid-ocean.

Source: AIR Worldwide

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