Here is industry-focused news pertaining to Hurricane Harvey. This post will be updated periodically.
- Dominica is reporting widespread damage from Hurricane Maria and Puerto Rico is bracing for impact tonight. Hurricane Maria became a Category 5 storm late Monday with maximum winds of 160 miles per hour, according to the National Hurricane Center.
- In Florida, houses complying with stricter building codes put in place after Hurricane Andrew had a better chance of withstanding Hurricane Irma. Kevin Simmons, a professor at Austin College, examined insured-loss data from 2001 through 2010 and found that the new building codes lowered windstorm losses by as much as 72 percent and that $6 in losses were saved for every $1 increase in construction costs. The Wall Street Journal reports.
- Hurricane Jose is expected to bring coastal flooding, rain and wind to the eastern seaboard this week. Hurricane Maria could strike Puerto Rico and the Virgin Islands as a Cat 4 storm. It’s too early to tell what the impact on the U.S. will be.
- A.M. Best issued a report which states that although insured losses as a result of Hurricane Irma will not be as severe as originally forecast, the storm will test the infrastructure and potentially strain the financial wherewithal of some local and regional carriers in Florida, particularly those that are geographically concentrated.
- Damage left by Hurricanes Irma and Harvey will lead to a hardened property market and pricing correction, at least in the short-term according to a KPMG survey.
- The ability of insurers to maintain high levels of customer satisfaction will be tested in the coming months amid the historic property losses and profit strains created by Hurricanes Harvey and Irma, according to a J.D. Powers news release.
- FEMA’s National Flood Insurance Program (NFIP) was extended to Friday, December 8, 2017, when the president signed into law House Resolution 601 on Friday, September 8. The NFIP provision was dropped into a larger bill on raising the federal government’s debt ceiling and allocating Harvey and Irma-related disaster relief funds. Had H.R. 601 not been enacted, the NFIP would have expired on Saturday, September 30, 2017.
- Bernstein analyst Thomas Seidl predicts that nearly 8 percent to 10 percent of insurance-linked securities capital is expected to get eroded after hurricanes Irma and Harvey, which could potentially cause U.S. P&C rates to increase by 4 percent to 5 percent.
- FEMA says that Hurricane Irma destroyed 25 percent of homes in the Florida Keys.
- GCCapitalIdeas.com has published this hurricane Irma update which includes a detailed meteorological discussion and impacts summary.
- Munich Re said its figures for the third quarter “will probably show a loss” and the reinsurer might miss its 2017 profit target due to hurricanes Harvey and Irma.
- AccuWeather predicts that economic losses from Harvey and Irma to be $290 billion. With losses from Irma alone at $100 billion.
- Citigroup reduced its estimate of total losses for Irma, to $50 billion from an earlier projection of $150 billion.
- Several more news outlets are reporting on the shortage of qualified insurance adjusters in the wake of Harvey and Irma. More on that here and here.
- The head of the National Flood Insurance Program said today that early estimates show Hurricane Harvey will result in about $11 billion in payouts to insured homeowners, mostly in southeast Texas. That would likely put Harvey as the second costliest storm in the history of the federal insurance program. More than $16 billion was paid out after Hurricane Katrina in 2005.
- Reuters (via Business Insurance) looks at the sudden need for adjusters in Texas and Florida and talks to insurers and claims personnel on how they will handle it.
- The Miami Herald has an interesting look at the financial wherewithal of Florida homeowners insurers. It loads slowly, at least on Saturday as the storm approaches.
- We’ve started to chronicle loss estimates for Irma.
- I.I.I staffer Maria Sassian got these highlights from today’s CoreLogic briefing on Irma:
- 8.5 million commercial and residential properties are at high or extremely high risk of wind damage.
- 2 millions claims are expected, with significant losses
- Sinkholes, already a problem in Florida are expected to get worse due to heavy rains.
- Flooding is possible in Georgia, with 7 to 12 inches of rain expected in the southeast part of the state and 3 to 6 inches in Atlanta.
- AIR estimates industry insured losses from Harvey at $10 billion. We’ve added that estimate to our blog post on Harvey estimates.
- Alternative investment tracker Artemis notes that $14 billion in cat bonds are exposed to Florida or East Coast wind.
- Financial Times frets about the (re)insurance market’s capacity in the wake of two huge events. I point the article out because it gives some insight into the degree of nervousness in the general public about this storm, but it doesn’t seem to acknowledge that between US surplus of $709 billion and $350 billion of reinsurance surplus that there’s about $1 trillion cushion, and no one is projecting events nearly that big.
- Irma hasn’t hit Florida yet, but a couple of publications have noted that one of Lloyd’s realistic disaster scenarios (stress tests) puts industry losses from a major hurricane at $131 billion. Karen Clark has estimated a repeat of the 1926 hurricane through Miami would cause $130 billion in insured losses.
- NFIP, in an email blast, said it received 71,000 claims through Sunday and has made $6.2 million in advanced payments.
- RMS estimates NFIP losses of between $7 billion and $10 billion.
- Some people are returning to their homes to find red type. And unfortunately only now are many people realizing that their homeowners insurance doesn’t cover flood.
- NFIP registered 46,881 claims from Harvey in Texas through Sept. 1 – 28,236 in Harris County.
- Politico dissects the D.C. debate over flood insurance:
Craig Fugate, who led the Federal Emergency Management Agency during the Obama administration, said the easiest way to shore up the program would be to “stop writing new policies on construction that hasn’t been built.”
That’s what legislation advanced by House Financial Services Chairman Jeb Hensarling (R-Texas) earlier this summer would have done.
The bill, part of an effort to reauthorize the flood insurance program before it expires on Sept. 30, would have phased out government coverage for new construction in high-risk areas. . . .
. . . But Hensarling backed down on the new construction limits in July after intense opposition from the National Association of Home Builders, a trade group that has already spent more than $2 million lobbying this year.
- The New York Times reports that about 100,000 vehicle insurance claims have already been filed in Texas in Hurricane Harvey’s aftermath, and up to 500,000 claims could be made in total, according to Matt Stillwell of the Insurance Council of Texas.
- The National Hurricane Center is advising that Hurricane Irma is expected to remain a powerful hurricane for days.
- The NFIP expires at the end of September and USA Today, Reuters and The New York Times all have recent articles on how Harvey is impacting lawmakers’ decisions to reauthorize.
- Our 9/1 roundup of loss estimates is here.
- CoreLogic releases estimate update: 70 percent of flood loss is uninsured. Insured residential loss around $1 billion.
- The Artemis blog reports that RMS puts the economic loss of Harvey at between $70 billion and $90 billion. Moody’s says the tab could hit $75 billion, according to Artemis.
- Fitch Ratings says Harvey and its aftermath are unlikely to result in downgrades of any insurers but notes that the NFIP will likely burn through its $1.042 billion in reinsurance protection. Because 25 companies share that layer, the ratings agency said the impact on each should be slight.
- The New York Times compares Hurricane Harvey to Hurricane Katrina. This story was published Aug. 28 but is currently the most emailed article on the website.
- To see our roundup of Hurricane Harvey loss estimates, click here.
- A pair of explosions rocked a flooded chemical plant in Crosby, Texas today. The plant lost power during Hurricane Harvey. “This whole thing is testing how well we have thought through our safety systems and programs and how robust the plants are” said Sam Mannan, of Texas A&M University.
- A.M. Best reports that the top three Texas insurers have taken in 89,000 claims from Hurricane Harvey so far.
- PCI calls for six-month extension of National Flood Insurance Program to handle Harvey claims.
- Wall Street Journal chronicles the plight of small businesses that lack flood insurance.
- For this storm, drones will be part of the claim professional’s toolkit.
- Houston is, perhaps, the world’s petrochemical capital. Willis explores the possibility of pollution claims.
- Soldera Holdings estimates that 500,000 cars were flooded out in Houston.
- East of Houston, more flooding – Port Arthur and environs.
- H is for Harvey. I is for Irma – a hurricane by the weekend.
August 29 & Earlier
- Business Insurance notes that S&P puts a $6 billion industry loss on the event, with primary companies, not reinsurers bearing the brunt. The article also raises discusses the possibility of flood vs. wind coverage disputes, which were a notable issue after Hurricane Katrina and superstorm Sandy.
- Rumors are festering in social media that insureds should rush homeowners claims. I.I.I discusses here and here.
- This is the first full year that National Flood Insurance Program bought reinsurance. There’s an excellent chance they will collect a limits loss, just over $1 billion.
- From MySanAntonio.com:
The Port of Corpus Christi remains closed after an oil drilling ship broke from its mooring Saturday, sank a tugboat and beached in the ship channel’s entrance to the Gulf of Mexico.
The port, which usually moves $100 million worth of goods a day, shut down midday Thursday before Harvey reached landfall as a Category 4 hurricane north of Corpus Christi Friday night. It can’t reopen until the Army Corps of Engineers inspects it and the beached ship is removed.
- Cat modeler AIR estimates insurance industry losses will be between $1.2 billion and $2.3 billion. That excludes residential flood insurance losses. The estimate includes auto losses, additional living expenses from homeowners policies and business interruption for commercial properties. Not included is “business interruption losses resulting from the closure of oil refineries in the region.”
- Cat modeling firm RMS says industry wind losses will be in the “low billions” in its continually updated blog. Though it hit shore as a Category 4 storm, “Harvey is not primarily about wind.”
Harvey has been intense, but remains relatively compact. Our analyses estimated an Integrated Kinetic Energy of 27 terajoule (Tj) at landfall. Compare this with 140Tj for Hurricane Ike and you get a sense of the difference in scale. Ike had five times the energy of Harvey.
- Flood losses will “likely overtake” wind losses, RMS says. It’s “not improbable” that losses will be high enough (above $4 billion) to trigger the National Flood Insurance Program’s private reinsurance treaties. I.I.I has blogged about the reinsurance arrangement previously.
- In an email blast Friday, CoreLogic estimated insured losses, excluding flood and business interruption, at $1 billion to $2 billion.
- Much of the wind loss from the storm will fall to the Texas Windstorm Insurance Association (TWIA), which covers the bulk of risks along the Texas coast.
- The 8/28 Wall Street Journal looks at the impact on the energy industry:
Energy companies are still assessing the damage from Harvey, after the storm shut down refineries, including Exxon Mobil Corp.’s Baytown facility near Houston, second in size only to Saudi Arabian Oil Co.’s Port Arthur refinery, which is in the storm’s projected path. “We’re just watching how this storm continues to develop. It seems like the worst case scenarios keep playing out,” said John Kilduff, founding partner at Again Capital. “This could linger for weeks.”
- The Journal also examined the financial situation of the National Flood Insurance Program. It’s worth noting that, despite its financial stresses, the NFIP has never failed to follow through on an insurance contract, and it is hard to imagine that changing now.
- The private insurance industry is easily able to handle its losses from the event. As of March 31 the U.S. property/casualty industry has $709 billion of capital, a cushion that will be more than adequate.
- You can find local rainfall totals at the Harris County Flood Control District’s Flood Warning System. The interactive map defaults to showing rain for the last 24 hours, but controls on the left of the map allow you to adjust that backward in time.
- An interactive road closure map is here.