RMS Estimates Ivan Insured Losses at $3-$6 Billion

Risk Management Solutions (RMS), a provider of products and services for the management of catastrophe risk, said that insured losses in the U.S. from Hurricane Ivan are expected to be between $3 and $6 billion.

RMS’ latest estimates are based on an updated “reconstruction of the hurricane’s wind field and detailed ground and aerial reconnaissance of the damage zone. Additional insured losses of $1-2 billion are expected from damage in the Caribbean, with the majority occurring in the Cayman Islands.”

The bulletin summarized Ivan’s path from its landfall early on Thursday, Sept. 16 near Gulf Shores, Alabama as a category three hurricane. RMS said “ground reconnaissance teams surveyed the landfall region beginning on Saturday, and have validated wind speed and damage estimates. The company also completed an aerial survey of the coastline from Gulfport, Mississippi eastward to Panama City, Florida, and extending inland along the path of highest winds from Pensacola, Florida to Montgomery, Alabama.

“Surveys have confirmed initial estimates of wind speeds along the Alabama and Florida coastline. The highest winds and losses are concentrated in Baldwin County, Alabama where the hurricane made landfall and immediately to the east in Escambia County, Florida where Pensacola is located.

“More than half of the total loss is expected in Florida, where insurers have already sustained losses of $9 to $14 billion from hurricanes Charley and Frances, according to RMS estimates. Losses from previous storms have led to an increase in regional building supply costs and labor shortages. The RMS loss estimate includes this demand surge effect.”

Aerial reconnaissance has also revealed extensive storm surge damage in immediate coastal areas from Gulf Shores eastward to Pensacola Beach. “We are seeing much higher levels of surge damage in this hurricane than in previous storms this season,” stated Mohsen Rahnama, vice president of vulnerability modeling at RMS. “The aerial reconnaissance has revealed both residential and commercial building collapses due to coastal surge and wave action. Of particular interest are several multi-story commercial structures that have collapsed due to failure of the building foundation.”

Ivan generated a storm surge of 10 to 16 feet above normal tides, and rainfall totals of 10 to 15 inches and more in some areas. While most flood losses, including coastal surge, are covered by the National Flood Insurance Program, the insurance industry does underwrite a limited amount of commercial and residential flood coverage in excess of NFIP limits. Many coastal properties have experienced both wind and surge damage, complicating the claim settlement process and potentially adding to total insurance industry payouts.

Specialty insurers of the energy sector are also expected to pay claims associated with offshore oil and gas platforms in the Gulf of Mexico. Ivan’s strongest winds passed through the easternmost portion of offshore fields, setting several platforms adrift.