The first hurricane of the 2018 season in the North Atlantic made landfall on Friday 14 September near Wrightsville Beach, North Carolina

Florence has proved to be an unusual storm which has defied the forecasters. Given its position on 7 September, in the North and East of the Atlantic, it was considered highly unlikely to endanger the US coastline. No storm from that position in the Atlantic had ever moved in the direction it took towards the US.

Once its westward course became clear, forecasters expected it to gain in strength, possibly becoming a category four or five by the time it made landfall in the Carolinas, but once again Florence proved the forecasters wrong, slowing to a crawl and weakening to a category one hurricane. Although the lower windspeeds, maximum sustained winds were around 75 miles per hour, means that there will be less wind related damage than had been anticipated; the slow moving nature of the storm coupled with extreme rainfall, suggests that the potential for flood, storm surge and wind driven water is heightened. Some areas are projected to experience more than 15 inches of rain. Storm surges will also mean that flooded rivers are not able to empty into the sea, pushing floodwater inland. These conditions could persist for a number of days.

Evacuation orders were put in place for more than 1.7 million people. More than 600,000 homes and businesses are without power and 14 people are reported to have died in the storm.

It will take some time until reliable estimates of the storm damage are available, although our understanding is that this loss will be more of a flood event for insurers than a wind damage loss. Under standard US policy wordings, flood damage is excluded for homeowners policies, with many consumers buying limited protection under the government backed National Flood Insurance Plan. The NFIP does buy some commercial reinsurance, including from Lloyd’s syndicates.

Some policyholders do buy excess flood cover from commercial insurers. Flood can be written into commercial insurance policies. Current expectations are that the total losses to the insurance and reinsurance industry are not likely to exceed $10 billion. Although individual insurance companies have different reinsurance buying strategies, it is broadly the case that an original loss needs to exceed $10 billion to impact on reinsurance markets generally.

Away from the United States, there have been notable natural catastrophes in Japan, where Typhoon Jebi is estimated to have cost insurers $5 billion, while this morning brought news of Typhoon Mangkhut which has swept across Hong Kong before heading into Southern China.