RMS, the Newark, Calif.-based risk modeling and analytics firm, estimated that the insured loss from Hurricane Maria will be between US$15 billion and US$30 billion.
This estimate represents the insured losses associated with wind, storm surge and inland flood damage across the Caribbean, with Puerto Rico and Dominica suffering the most widespread destruction, RMS explained. The estimate includes property damage and business interruption to residential, commercial and industrial lines of business, with the vast majority of losses caused by wind damage.
RMS’ estimate comes on the heels of AIR Worldwide’s estimate of US$40 billion to US$85 billion, with Puerto Rico alone accounting for more than 85 percent of the loss.
“The Caribbean was hit hard by Maria, but Puerto Rico bore the brunt of insured damage,” said Michael Young, RMS head of product management for U.S. climate models. “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, significant amounts of property damage will not be insured, and this will limit industry losses.”
RMS said it has had detailed discussions with insurers on the island, who report that in those urban areas with higher rates of insurance penetration, structural damage may be more limited.
Indeed, RMS noted, the most catastrophic impacts may have been in areas with very low insurance coverage, which is why Maria’s insured losses across the Caribbean will be significantly lower than overall economic damages of between $30 and $60 billion.
Post-Event Loss Amplification
RMS noted, however, that there are also amplifying effects on industry losses. For example, Hurricane Maria severely affected power supplies, with outages that will last months. Fuel for electricity generators is running short.
As well as being a humanitarian concern, this will have implications for Puerto Rico’s economy with significant business interruption, including to the island’s important pharmaceutical industry, said RMS, noting that flooding has also washed away roads and bridges.
“RMS clients are reporting that structural damage on Puerto Rico of key industrial complexes is relatively limited,” said Young. “But the electricity shortages, significant infrastructure disruption, and possible labor shortages, are expected to amplify direct losses by almost 50 percent, which is reflected in our estimate.”
In addition, RMS expects shortages of claims adjusters and reconstruction workers, following the dual impact of earlier Hurricanes Irma and Harvey on the Caribbean and the U.S. mainland.
Hurricane Maria was the 13th named storm of the 2017 North Atlantic hurricane season, first making landfall over Dominica on Sept. 19 as a category 5 hurricane, maintaining its intensity as it tracked across the Caribbean near to Guadeloupe, Martinique and the U.S. Virgin Islands before weakening to category 4 strength as it made landfall in Puerto Rico.
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