Reinsurers to feel little impact from Irene, says expert
Most of the insured losses caused by Hurricane Irene in the US are likely to be borne by primary insurers, meaning that Bermuda’s reinsurers should see little impact from the storm.
That is the view of industry expert and economist Robert Hartwig, President of the Insurance Information Institute.
“Reasonable estimates for insured losses (excluding the federal flood programme) are in the $3 billion to $5 billion range,” Dr Hartwig told
The Royal Gazette yesterday.
“At this magnitude of loss, Irene is not a ‘market turning’ event, though it does incrementally add pressure to property insurance rates and property/catastrophe reinsurance markets.
“I don’t believe reinsurers will see much impact from Irene. Most of these losses will be retained by primary insurers.”
Dr Hartwig said the market still remained overcapitalised, though somewhat less so than it was when capacity reached peaked in the first quarter of this year.
Shares of most Bermuda re/insurers fell by less than one percent yesterday, after a majority of them recorded gains of between four and eight percent on Monday after loss estimates from the storm were lowered.
Catastrophe modelling firm AIR Worldwide estimates that insured property losses from Irene, which caused flooding and wind damage up the eastern side of the US last weekend, to be between $3 billion and $6 billion.
AIR’s estimates include wind and storm surge damage to onshore residential, commercial and industrial properties and their contents, automobiles, and time element coverage (additional living expenses for residential properties and business interruption for commercial properties).
AIR noted that typically, coverage for flood damage resulting from surface water, including storm surge caused by hurricanes, is excluded under standard homeowners’ and renters’ insurance policies and is instead offered by the National Flood Insurance Programme.
Some of the worst problems caused by the storm have been in Vermont, which has experienced its worst flood in a century. There had been fears of large losses as the storm passed closed to New York City, but the massive system weakened before it reached the Big Apple.
“In New York City, city officials had been worried that the arrival of Irene would coincide with a high tide and potentially inundate the flood defences of lower Manhattan,” said Dr Tim Doggett, principal scientist at AIR Worldwide. “Fortunately, only minor flooding occurred and it receded quickly.”