Hurricane Michael - an early view
Hurricane Michael made landfall on the Florida Panhandle overnight on 10 October. This was an intense storm with the third lowest recorded barometric pressure of any hurricane to hit the USA since 1900. Maximum sustained winds were 155 mph, so although it was designated as category four, it was very close to category five which is accorded to storms of 157mph. Given this intensity, Michael continued with hurricane force winds as it made its way inland, passing over Northern Florida and into Georgia. Although winds have now abated, Michael is expected to continue to cause damage as it passes across South Carolina, North Carolina and Virginia over the next day or so.
Michael had already killed 13 people; six in Hondoras, four in Nicaragua and three in El Salvador, as it passed through Central America. In the USA, more than one third of a million people were advised to evacuate and two are known to have been killed by falling debris. As emergency services resume their search in daylight, there may be news of more casualties.
Although this was a devastating storm for those in Michael’s path, it is not likely to be a significant event for insurers and reinsurers. The Panhandle region of Florida is not as built up as is the Miami and Gulf coastline and buildings are generally of a lower quality. Many buildings in the area are of wooden frame construction; more susceptible to storm damage but carrying lower insurance values. Mobile rigs in the gulf were safely moved out of harm’s way. The fast moving storm brought less rain to the impacted areas than was experienced in last year’s Hurricane Harvey or this year’s Hurricane Florence. Flood caused by rainwater is therefore expected to be less of an issue. There has nonetheless been a substantial storm surge along the coast from Mobile in Alabama to Tampa in Florida.
We have received some early estimates for the cost of the damage, although these are based on modelled output and not on any loss assessor’s view. Corelogic, a data analytics business, has estimated losses to the insurance industry at less than $5 billion. If this is accurate, it will only be large enough to reach the bottom layer of those primary insurers’ reinsurance programmes with the smallest retentions. Although it may be sufficiently recent in the memories of underwriters in the renewal season to prevent rate reductions, we do not think it will add any material impetus to pricing of property catastrophe business at the year end.