Barely a month after Hurricane Charley battered Florida, the state has felt two more hurricanes reach landfall. As this issue of Claims went to press, Ivan had just crashed ashore in the Florida panhandle, Alabama, Louisiana, and Mississippi, and residents of the Southeastern coastline were crossing their fingers that Jeanne and Karl would not come knocking.
"Florida hasn't had to deal with devastating hurricanes in such close succession in decades, and the experience for millions of residents and businesses has been distressing," said Thomas Benoit, president of Catastrophe Management Consultants, a loss consulting firm with headquarters in Tampa, Fla.
The confluence of events resulting in Florida's being struck by three hurricanes has only a two percent chance of occurring in any year in the United States, according to Thomas Larsen, senior vice president of EqeCat. A similar series of events happened three times early in the last century, in 1926, 1933, and 1935. The Labor Day storm of 1935 was one of only three category-five hurricanes to strike the U.S. Gulf and Atlantic Coast in the 20th Century. The last was Hurricane Andrew in 1992.
When the final reckoning comes in, the three hurricanes are likely to cost the insurance industry more than the $15 billion in claims that resulted from Andrew, according to the Insurance Information Institute. The institute also expects that the total number of claims will exceed one million, surpassing the 700,000 claims filed for Andrew, and setting a new record for the number of claims in such a short span of time.
Although insurers have sufficient financial resources to pay the claims, the quick succession of Hurricanes Charley, Frances, and Ivan will make the claim-handling process in Florida more difficult. "Ivan, Charley, and Frances together do not pose a solvency-threatening event to the industry," said Robert Hartwig, chief economist of the III. "However, the unprecedented challenges created by the multiple hurricanes understandably will strain resources and cause some delays that would not normally occur."
The industry will be working hard in the face of the same obstacles faced by its customers: lack of power, phone service, and access to properties in severely damaged areas, Hartwig said. An estimated 15,000 company claim adjusters from across the United States and Canada were deployed in Florida, with additional adjusters in Alabama and other affected areas.
Adjusters still are working to handle claims from Hurricane Frances, which reached landfall along the Florida's Atlantic coast on Sept. 5. Insured losses from the second of the hurricanes to strike the U.S. this year range from $3 billion to $6 billion. At the time of landfall, Frances had maximum sustained winds of 105 miles per hour, making it a moderate category two hurricane, according to EqeCat data. Frances moved slowly across the state at 7 miles per hour, continuing to weaken as it traveled inland.
Preliminary reports from member companies of the Property Casualty Insurers Association of America indicated that, while Frances will produce significantly more claims than did Charley, the average claim will not be as high. "Early reports indicate that damage is much more widespread due to the path and size of Frances and, as a result, we expect to see a much larger volume of claims than we saw in the aftermath of Charley," said John Eager, senior director of claims for PCI. "However, damage generally is not as severe and much of the damage is flood-related."
The industry is being cautious about estimating damages from the hurricane at an early stage, added Eager. "As we saw in the aftermath of Charley, initial estimates of insured losses were as high as $20 billion, when, in reality, they were closer to $7 billion," he said. "We think it's better to wait and get it right than to speculate about damage without the facts."
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