Expect an Historic Q3 in Terms of Natural Disaster Costs: Impact Forecasting

As bad as September was in terms of natural disasters and the resulting costs, the 2017 third quarter as a whole could be positively historic as a result.

A new report from Aon Benfield’s Impact Forecasting said September will pose a major burden on the insurance industry and federal governments in the United States and the Caribbean, creating significant total catastrophe losses for the quarter, especially on top of other events.

“The month of September was exceptionally busy and marked by the most active month on record in the Atlantic Ocean for hurricanes based on combined strength and longevity,” Steve Bowen, Impact Forecasting director and meteorologist, said in prepared remarks.

Bowen noted that the most extensive damage came from Hurricane Irma’s strike across the United States and Caribbean, as well as Hurricane Maria’s Caribbean tirade. Two earthquakes in Mexico as well as a powerful aftershock made thins even worse in terms of catastrophe costs, he said.

“The third quarter of 2017 is expected to tally as one of the costliest quarters ever registered for natural disasters,” Bowen added.

Impact Forecasting isn’t the first firm to assert this. In late September, Morgan Stanley predicted that Hurricane Maria, coming on top of Hurricanes Harvey (which hit in August) and Irma and two major earthquakes in Mexico, could leave insurers and reinsurers facing more than $100 billion in insured losses for Q3.

Impact Forecasting won’t make a detailed estimate yet of economic or insured losses for the quarter, because of Irma and Maria and the complexity of the damage they caused. The firm noted it is still too early for details, in part, because of “the prolonged business interruption impact.” But the overall financial impact of each storm should “reach well into the tens of billions of dollars.” Public and private insurers in each case will deal with payouts above $10 billion, Impact Forecasting added.

Here’s a roundup of Septembers’ major natural disasters:

• Hurricane Irma hit the Caribbean as a Category 5 hurricane and made landfall in the U.S. as the first Category 4 storm to hit Florida since 2004’s Hurricane Harvey. At least 124 people were killed or missing, with hundreds injured, after unusually gusty winds, high surf, storm surge, torrential rains and inland flooding. The United States, Cuba, Barbuda, the Virgin Islands and the northern Leeward Islands all took major hits.
• Hurricane Maria became the second Category 5 hurricane to make land in just a few weeks, hitting Dominica and touching St. Croix. It crossed Puerto Rico as a major Category 4, becoming the strongest storm to hit the island since 1932. There was catastrophic damage and impact, with further damage in the Dominican Republic and Haiti. At least 78 people were confirmed dead ad many more are missing.
• Typhoon Doksuri left major damage across Vietnman, the Phillipines, southern China and Laos. It killed 40 people and damaged nearly 250,000 homes, causing $500 million in economic losses.
• Tropical storm Talim damaged nearly 7,000 homes in Japan.
• There were days of flash flooding in parts of Italy and Croatia from a storm system that killed at least 9 people and caused $250 million in economic damage in Italy and $160 million in Croatia.
• Major flooding in the Democratic Republic of Congo killed 105 people, left 23 people killed or missing in Uganda, and caused $481 million in economic damage in China.
• Windstorm Sebastian swept the United Kingdom, the Netherlands and Germany on Sept. 12-13, killing 3 people and causing major damage to Germany’s agriculture sector.
• Major wildfires destroyed dozens of homes and other structures in the western United States.

Source: Impact Forecasting/Aon Benfield