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Katrina
The modelers wind-only loss estimates are:
- EQE $14Bn – $22Bn
- AIR $12Bn – $26Bn
- RMS $20Bn – $35Bn
These are all on the low side, because of non-modeled exposures. They likely
exclude LAE, insured Flood losses, most marine losses (except RMS is including
rigs), at least EQE is only speaking about the second landfall. There are no
estimates yet from PCS or Sigma, and they will be informative.
But even with this detail, the degree of damage will be fairly difficult to gauge.
Here are some considerations:
- The models do not measure flood except at the coastline. Homes are
insured by the Federal plan, not the market, but there is Flood coverage
for Personal and Commercial auto, Contractors and Farm equipment,
PAF’s, Cargo, MOP and many commercial property policies (although
usually sublimited.)
- Further inland, tree limb damage is not modeled outside of the areas with
sustained winds over 50 or so mph. There will be losses inland that are
not modeled.
- The tornados in Georgia can be modeled, but they are not in these estimates.
- The Marine loss is substantial. RMS notes that this is likely the largest rig
storm loss ever, and Ivan was a sizeable loss. There is also a great deal of
damage to docks, marinas and yachts.
- There has been some notable fires and looting.
- Mold.
- Existing and compounding damage from Ivan and Dennis in the Mobile
to Pennsacola areas.
- Time Element coverage will be extended because of the continuing
evacuation orders and because of the need to clean up from flooding
before residents can safely return.
We should also expect a higher than expected degree of demand surge, both
because of the remaining inflations from the 2004 situation, and because of
significant resources devoted to Fed Flood and other uninsured losses.
Population Dencities: Katrina 2005 vs. Andrew 1992
Recent Gulf Coast Landfalls
Fatalities
Worst US Disasters in Human Lives
1. Galveston, Texas, Hurricane, 1900 — estimated 8,000 deaths
2. September 11, 2001 Attacks — 2,752 in NYC, plus approximately 200 in D.C. and
Pennsylvania
3. Great Okeechobee Hurricane in Florida, 1928 — estimated 2,500-plus
4. Johnstown, Pa., Flood, 1889 — estimated 2,200-plus
5. Louisiana Hurricane, 1893 — 2,000-plus
6. South Carolina-Georgia Hurricane, 1893 — 1,000 – 2,000
7. Great New England Hurricane, 1938 — 720
8. San Francisco Earthquake, 1906 — 700
9. Georgia-South Carolina Hurricane, 1881 — 700
10. Tri-State Tornado in Missouri, Illinois and Indiana, 1925 — 695
11. Texas City Explosion, 1947 — approximately 600
12. Labor Day Hurricane in the Florida Keys, 1935 — 405
Katrina: 1,050+ confirmed, with areas of New Orleans still unexplored, is number 7 on the list.
Katrina
Holborn Observations
| On-shore Wind Loss |
Winds 12% lower than Andrew; population 35% higher.
Mississippi-only death toll 10x Andrew’s. Based on windspeed,
pressure, local population, initial news reports and
preliminary client “footprint” analyses, we estimate damage
as similar to Andrew’s $22Bn in 2005 dollars, with normal
demand surge. |
| Off-shore Loss |
Worst ever, > Ivan’s $2.6Bn |
| Insured Flood |
BAD! |
| Demand Surge |
40% vs. 20% – 30% in the wind-only models |
| Total Market Loss |
Worst ever in nominal dollars |
| Total Economic Loss |
As bad as 9/11 in dollars, less than SF 1906 or Kobe as a
percent of GDP |
Katrina
Difficult Coverage Issues
- “When in doubt pay it...” Mississippi Insurance Director
- Is Flood exclusion “unconscionable”?
- “That wasn’t a Flood that was a Barge-Levee Collision”
- Florida: Mierzwa decision. Both Flood and Wind coverages can pay on total losses
- Separating Time Element into Wind (covered), Flood (sometimes), Public Safety evacuation (not covered)
- Separating Flood from Looting, Fire, Collapse, Deliberate acts of Search and Rescue
- Flood is covered under Auto and IM coverages
Fairness of State Legal Systems
 |
| Rankings |
|
| 50th |
Mississippi |
| 48th |
Alabama |
| 47th |
Louisiana |
| 42nd |
Florida |
| Source: U.S. Chamber of Commerce, March, 2005 |
|
Katrina Gross Loss by Peril
Holborn Estimates
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| Total Insured Property and Marine Loss and LAE: |
|
| Non-Marine Wind — South Florida Landfall |
$1Bn to $2.25Bn |
| Non-Marine Wind — Gulf Coast Landfall |
$25Bn to $32.5Bn |
| Marine Wind |
$5Bn to $10Bn |
| Market Insured Flood |
$5Bn to $15Bn |
| Other Insurable Perils |
$2.5Bn to $7.5Bn |
| Flood Coverage Disputes |
Loss of $0 (current assumption) and
LAE of $1Bn to $3Bn |
Gross Insured Loss and LAE
(Excluding Casualty, WC and Life) |
$45Bn to $65Bn |
|
Market Conditions
Katrina Loss Estimates
Katrina Gross Loss by Market
Holborn Estimates
|
| National Commercial and Multiple-Line Cos. (20) |
$16Bn — $23Bn |
| National Personal Lines Companies (7) |
$12Bn — $18Bn |
| One-Region Companies (8) |
$4Bn — $6Bn |
| Multi-Regional Companies (14) |
$3Bn — $5Bn |
| Direct by Admitted Reinsurers (7) |
$1Bn — $2Bn |
| Marine Specialists (5) |
$0.6Bn — $1.0Bn |
| Citizens Insurance (Florida) |
$0.3Bn — $0.5Bn+ |
| Florida HO Specialists (25) |
$0.2Bn — $0.4Bn+ |
All Others, including E&S and Non-admitted
Foreign, such as Lloyd’s |
$8Bn — $12Bn |
|
| Market Gross Loss and LAE |
$45Bn — $65Bn |
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Katrina Net Loss by Market
Holborn Estimates
Historic US Industry Market Events
Loss only (no LAE)
Actual and Fitted US Catastrophes
Industry Loss On Level to GNP
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