Expect a $10b Loss Every Four Years from Hurricanes

The track of The track of "The Great Miami Hurricane," which made landfall on Sept. 18, 1926 near downtown Miami.

NU Online News Service, Aug. 21, 2:55 p.m. EDT

A new report by Karen Clark & Co. says storms capable of major losses are not as infrequent as we might assume. In fact, the United States can anticipate insured losses of at least $10 billion from a hurricane an average of every four years, based on an analysis of more than a century of hurricane experience. 

Using a new methodology, Clark’s firm ran nearly 180 U.S land-falling hurricanes through a formula to determine which storms would likely cause at least $10 billion of insured losses if they were to strike today.

Karen Clark tells PC360 the report highlights the results of a multi-month-long project on historical events requested by clients.

“Clients like to know history,” she says. “'If a storm is repeated, what would happen to my book of business today?' They can also benchmark model results.”

The results shift the common perception of the worst storms in terms of insured loss due to denser areas, especially on the coast, as well as larger and more valuable buildings that exist today.

For example, 2005’s Hurricane Katrina—known as the costliest hurricane in U.S. history at about $40 billion—falls to the seventh position on Clark’s new list.

Download the report here.

The top spot—by far—now belongs to an unnamed storm, the “Great Miami Hurricane” of 1926. Clark’s experts in catastrophe risk, models and risk management say the storm would cause a whopping $125 billion in losses today.

The second costliest storm would be the 1928 Okeechobee (Florida) Hurricane at about $65 billion, according to the report.

Interestingly 1992’s Hurricane Andrew would cause more damage than Katrina if Andrew hit the same spot—just south of Miami—today. Clark says Andrew’s insured loss tally would be about $50 billion.

TOP 10 COSTLIEST HISTORICAL HURRICANES

Andrew caused about $15.5 billion in losses when it traveled over Florida 20 years ago. The losses were accurately predicted by Clark, founder of what is now known as AIR Worldwide, back then.

Among the findings some readers might discover surprising is the fact just two storms from the Southeast—Hazel and Hugo—would cause more than $10 billion in losses. There simply is not the kind of concentration of exposure here as there is along other portions of the coastline, such as in the Northeast, Clark says.

Karen Clark & Co. says the report “fills an important void” because it doesn’t simply adjust original losses by the rate of inflation. Instead, it takes into account population increases, valuations and construction costs using multiple sources of information in the methodology.

Estimates were rounded to the nearest $5 billion “to avoid the illusion of accuracy and false precision given the uncertainty around the estimates.” 

Comments

Resource Center

View All »

Complimentary White Paper: The Compression of Workplace Time

How brokers and carriers respond to the compression of workplace time will create significant competitive...

The Changing Insurance Consumer: 6 Ways to Create Profitable Relationships

Today’s mobile and web-savvy consumers have new expectations when it comes to interacting with your...

Contractors General Liability Coverage 102

What is a prior work exclusion? Which option is right for my client? Why do...

Sign up today to get a 50% matching credit -...

Insurance marketing sometimes seems like it's a game of swings and misses, but we're here...

Guide: 5 Steps to Selling Cyber

Cyber risk and data security is on the agenda of every business owner and executive....

Citation Correlation

Do rigger and signalperson qualifications correlate with the cause of crane and rigging accidents? ...

Complete Guide to Electronic Signatures in Property & Casualty Insurance...

In property and casualty insurance, closing new business quickly is key. Learn how to leverage...

INSTANT ACCESS: Complimentary Sales Closer Questionnaires

Help property owners or managers compare your commercial residential property insurance coverage vs. the competition....

Determining Vacant Property Perils and Valuations

Are your clients fully covered for Vacant Properties? In this economic climate, your insureds may...

Risk Management for Law Firms

This package of 3 concise risk management articles offers straightforward content and practical suggestions law...

Claims Connection eNewsletter

Breaking news on disasters, fraud, legal trends, technology, and CE initiatives for the P&C claim professional – FREE. Sign Up Now!

Claims-Handling Guidelines

Claims Magazine is providing the following free guidelines and regulations in order to help adjusting professionals stay abreast of each state’s unique property and casualty claim-handling requirements.

View our State Guidelines »

Advertisement. Closing in 15 seconds.