Cat 3, 4 or 5 hurricanes hitting highly developed east coast areas could result in $100 billion in insured losses, bankrupting 20 to 50 insurance companies, according to a new A.M. Best study. After Hurricane Andrew hit Florida in 1992, multiple insurers concentrated in the Florida market failed; their failures triggered a cash crisis in the insurance guaranty fund that back up failed insurers. The impact of a big storm hitting highly developed areas today would be four times that of Hurricane Andrew.
The new studies combined risk modelling tools, data about the build-up of property values along areas such as Florida and the Jersey Shore-Hudson River area and interviews with insurance leaders to develop models of the impact of a major storm that hit such areas. A major hurricane landfall in the U.S. has been estimated by some climatologists as 55% above average for the hurricane season about to start. "Thinking the Unthinkable: How 'Mega-Cats' May Bruise Insurers," A.M.Best, (May, 2006).
See also: A.M. Best: A 'Mega-Cat' Hurricane Would Be Fatal to Some Insurers, Insurance Journal (June 1, 2006).
Thanks to Specialty Insurance Blog: AM Best Hurricane Study (June 4, 2006)
Posted by dougsimpson at June 6, 2006 05:53 AM