It’s been just over a month since Hurricane Matthew ravaged the Southeast coast but the insurance industry’s job of responding to the devastation and assessing the total cost of damage from the storm is far from over. With the flood that followed the storm in the Carolinas – particularly in North Carolina – the industry expects to feel the effects of the storm for some time.
By all accounts, the destruction left behind by Matthew wasn’t as bad as what was originally anticipated. Storm experts say that’s because the storm didn’t hit land as the category 4 hurricane that impacted Haiti days earlier.
“When Matthew was nearing Florida, there was a large amount of uncertainty of whether there would be more wind and storm surge or less so because the storm was paralleling so close to the coast,” said Tom Sabbatelli, RMS Hurricane Risk Expert based in the UK.
Sabbatelli said the fact that Matthew stayed about 50 miles off the coast and the hurricane force winds remained around the center of the eye made a big difference for the state, sparing it from extreme devastation: “Florida avoided the strongest of the winds,” he said.
But, he added, remaining offshore for so long, an unusual phenomenon for a hurricane, also allowed the storm to keep its strength and stay a category 3 and category 2 storm as it traveled north over Georgia and the Carolinas.
“As it tracked up the coast it maintained its intensity,” Sabbatelli said. “There hasn’t been a great amount of historical precedence for this track.”
Andrew Higgins, technical manager for Allianz Risk Consulting, said analysts expected Matthew would be more of a high-wind storm and the flooding that occurred in South Carolina and North Carolina in its aftermath wasn’t expected.
“We really didn’t see that coming. Obviously with these types of events you have flooding and storm surge, but this storm slowed down as it made landfall in Charleston [S.C.] and dumped a tremendous amount of rain in North Carolina,” Higgins said.
RMS’ estimated the losses from the storm to be between $1.5 billion and $5 billion. RMS said approximately 70 percent of the U.S. losses are residential, while storm surge-driven coastal flooding is estimated to contribute around 30 percent of the all-lines loss. That includes coverage leakage and an escalation in claims severity for wind-only policies in situations where wind and water hazards co-exist in residential lines of business.
RMS said its event reconstructions show a small possibility of losses in excess of $4 billion, but said there is a still possibility that losses could reach as high as $5 billion. Its estimate does not include losses to the National Flood Insurance Program or to public buildings and infrastructure.
The consensus from other modeling firms have the storm impacting the industry in the $3 billion to $10 billion range: CoreLogic said it anticipates the industry will see about $4 to $6 billion in damage; Karen Clark & Co. estimated the losses to be about $7 billion; and AIR Worldwide put its damage estimates between $2.8 billion and $8.8 billion.
KCC said the most impacted coastal areas include: Daytona Beach, Fla.; Tybee Island, Ga.; and Hilton Head Island, S.C.
However, thousands of residents in North Carolina were left without power for extended periods of time and major flooding lasted for more than two weeks in some areas, which will undoubtedly lead to more claims. Business interruption claims will be significant especially because of the long-term power outages, Higgins said.
A lot of the damage was flood related, particularly in eastern North Carolina, and those claims are not covered by the insurance industry unless claimants have private flood insurance.
“Since it didn’t make a direct hit as a major hurricane, we won’t see major wind damage claims,” he said. “But because it hugged the coast and went inland we will see more flooding.”
“The good news – if there is any good news to be had with this story – is that this could have been a much worse event,” said Neil Alldredge, senior vice president of state and policy affairs for the National Association of Mutual Insurance Companies (NAMIC). “For the people affected it is bad enough, but it was anticipated that with the way the storm tracked it could have been a much larger event. This is good news for the broader economy.”
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