Consensus forms around $3bn to $5bn insured Dorian loss

A consensus is beginning to form over the (re)insurance industry’s exposure to losses arising from Hurricane Dorian, with $3bn to $5bn being the most widely accepted range.

Some sources suggested a range of $1.5bn to $5bn. That would match the lower end of the range that AIR Worldwide issued last Friday of $1.5bn to $3bn, though that forecast included only Caribbean claims.

(Re)insurance executives at the Rendez-Vous in Monte Carlo have suggested a range of $3bn to $5bn is a more accurate assessment of the industry’s total exposure.

Catastrophe modeller Karen Clark & Company issued a preliminary estimate of economic losses in the Bahamas from Dorian at $7bn. As one industry source explained, it is generally accepted that 40-70 percent of that number could be taken as an insured loss. That would put insured losses at a range of $2.8bn to $4.9bn for the Bahamas.

Meanwhile, risk modeller RMS has released a projected range of $3.5bn and $6.5bn for insured losses from wind and storm surge resulting from Dorian, with nearly all expected to come from the Bahamas.

The islands of Abaco and Grand Bahama were the worst hit by Dorian. The most heavily populated island of the Bahamas – New Providence – was spared the worst of the storm. As such, there is a feeling in the market that the industry’s losses could have been far worse.

However, there is widespread devastation on the two islands worst hit. Consequently, companies such as Bahamas First, RoyalStar Assurance, Colonial Security & General and Summit Insurance are expected to suffer significant losses from Dorian.

The major European players, and particularly those with a significant presence in the regional hub of Miami, are expected to bear the brunt of losses, with Swiss Re, Munich Re, Hannover Re, Scor and Everest Re all in the firing line when it comes to reinsurance treaties, market sources said.

There is also understood to be considerable binder capacity placed in the Bahamas, with companies such as Dual, Pioneer and Capsicum Delegated Authority all prominent players, sources said.

The storm first formed in the central Atlantic on 24 August and strengthened to hurricane status four days later. It became a Category 5 hurricane on 1 September and the same day made landfall in Abaco. Later that day, the storm made landfall on Grand Bahama.

After moving slowly over the Bahamas, Hurricane Dorian made landfall in the US in North Carolina. The storm then impacted Halifax, Nova Scotia, bringing with it winds of up 100 mph.

In the Carolinas, reinsurance losses are expected to be low to non-existent, as the level of claims set to hit homeowners’ carriers are unlikely to hit the thresholds at which programmes are triggered.

It is a different story in Canada, however, with reinsurance coverages attaching at far lower levels. Many executives said it was too early to tell what losses will arise.