Hurricane Dorian could hit the insurance industry with more than $25 billion in losses, UBS says ☘ Hoey Team ☘ eXp Realty Florida

Dated: September 8 2019

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Reuters

  • Hurricane Dorian could cost insurers more than $25 billion, according to recent research from UBS.
  • The analysts said the storm could bring total losses of as much as $40 billion, depending on where it hits Florida's coast.
  • Though reinsurers have built up $30 billion in excess capital since Hurricane Maria in 2017, UBS estimated that Dorian could wipe out reserves and lead the companies to raise their prices.
  • Read the latest coverage of Hurricane Dorian here.

Hurricane Dorian could cost insurance companies more than $25 billion after battering the Bahamas and surging over Florida's eastern coast, according to UBS analysts cited by CNBC.

The bank recently widened its loss estimate and now expects Dorian to cause $5 billion to $40 billion worth of damage. It also increased its base case for the storm's impact on insurers to $25 billion from $15 billion.

Dorian is the most powerful storm to hit the Atlantic since the 1935 Labor Day hurricane, according to the National Hurricane Center.

UBS noted that the two-year gap between Hurricane Maria in 2017 and Dorian allowed reinsurers to pull together $30 billion in excess capital. UBS estimated that Dorian could wipe out the reserve and lead reinsurers to raise prices.

The hurricane pummeled the Bahamas over Labor Day weekend and is expected to hit Florida on Tuesday, according to the NHC. Forecasts have shown the storm weakening and increasing in size as it creeps up the US's East Coast this week. Dorian is expected to reach Georgia on Wednesday and South Carolina on Thursday morning.

A Friday note from UBS compared Dorian to 2004's Hurricane Jeanne, which took a similar trajectory and caused about $5 billion in insured losses.

Risk Management Solutions estimated that Jeanne would have caused about $13 billion in damages today based on current demographics and costs in the affected area. The risk-modeling company used Jeanne's path, population growth, and inflation data to estimate Dorian's damages at $11 billion to $37 billion.

The region's "unique" insurance landscape places greater risk in reinsurers, UBS said in its note on Friday. Major insurance companies have relatively little market share in Florida compared with regional providers, which tend to rely heavily on private reinsurance plans and the state's Hurricane Catastrophe Fund, the analysts said.

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