Wilma expected to result in significant losses

Standard & Poor’s Insurance Ratings Group recently released a report stating that the potential impact Hurricane Wilma will have on insurers is still unknown but expected to be substantial, while catastrophe risk modeling company EQECAT Inc. says losses may range from US$2 to $US6 billion.Standard & Poor’s (S&P’s) forecasts that, based on previous losses that have resulted from prior Category 3 storms in Southern Florida, Hurricane Wilma may cause substantial insured personal, business and reinsurance losses.The report from S&Ps addresses whether, in the wake of Katrina and Rita, insurers and reinsurers doing business in Florida as well as the CAT Fund will be able to withstand the cost of damage that could result from another powerful hurricane. Many primary and reinsurance companies that do business in Florida also do business in Louisiana, Texas, and Mississippi the states that sustained the most insured losses from Katrina and Rita. EQECAT however estimates that based on the National Oceanic and Atmospheric Administration’s (NOAA) current information on Wilma, insured losses in Florida could range from US$2 billion to US$6 billion.These figures are determined using a model based on windspeeds of 125 miles per hour at landfall.”Beyond wind damage to commercial and residential fixed structures, such as office buildings, factories, warehouses, and homes,” EQECAT reports, “insured loss estimates include business interruption, which covers loss of earnings as a result of the destruction of property; and demand surge, which occurs when the demand for products and services to repair damage significantly exceeds the regional supply.”Therefore, EQECAT says that distant areas will have to provide CAT damage products and services, which turn increases the costs for transportation, packaging and manufacture. EQECAT excluded insured losses related to offshore platforms, commercial flooding, private and commercial automobiles and similar vehicles, and marine assets, such as boats, from its current estimate. So far this season, Florida has sustained about $1 billion in insured losses and losses incurred as a result of Wilma may greatly increase this figure as Wilma is heading toward Miami-Dade, Palm Beach, and Broward counties the primary area of exposure for the Florida Hurricane Catastrophe Fund.