Hurricane-drenched market

As the southern states of Louisiana, Mississippi, Alabama and Texas dig their way out of the devastation wrought by Hurricanes Katrina and Rita, Florida sustained a pounding of its own from the winds of Hurricane Wilma, a Category 3 storm.

Catastrophe risk modeling company AIR Worldwide Corporation is estimating insured losses from Hurricane Wilma to be between $6 billion and $9 billion. Risk Management Solutions (RMS) is predicting losses to be between $8 billion and $12 billion.

Wilma made landfall at 6:30 a.m. on Oct. 24 at Cape Romano, Florida, as a Category 3 hurricane with maximum sustained winds of 125 mph.

The lower vulnerability of structures in Florida will lead to insured losses well below those of Katrina, AIR predicted.

“The building code in south Florida is the most stringent in the U.S. and far more rigorous than in the parts of the Gulf Coast affected by Hurricanes Katrina and Rita,” Dr. Jayanta Guin, AIR vice president of research and modeling, said in a press release. “Our detailed analysis of claims data from the 2004 season showed that Florida’s stronger codes led to less damage than would normally be expected had the storms hit a more vulnerable area of the coast, as reflected in our model.”

AIR says the largest driver of losses will be the concentration of properties on Florida’s east coast between West Palm Beach and Miami. “AIR estimates that there is more than $500 billion of insured properties in Miami-Dade and Broward counties alone,” said Dr. Guin. “Based on Wilma’s large size – hurricane-force winds extend about 90 miles from the center – we expect to see widespread, though less severe, damage on Florida’s east coast.”

Meanwhile, RMS revised upwards an initial damage estimate of between $6 billion and $10 billion, based on onshore damage resulting from wind and coastal storm surge, business interruption, and increased costs for materials and services needed for repairs (demand surge).

RMS said it increased its estimate of insured losses resulting from Hurricane Wilma based on a further analysis of the wind speeds in the Miami metropolitan area and along the eastern coastline. RMS reconnaissance teams have reported extensive areas of roof damage indicative of wind speeds in excess of 90-100 mph across the area.

“High-rise commercial buildings in Miami have also sustained significant damage to windows and cladding, contributing to the insured losses,” RMS noted. “Widespread power outages continue throughout the metropolitan area, as well as in parts of Naples and surrounding communities, which will likely propagate business interruption claims.”