Hurricane Maria
9/25/2017 12:00:00 PM
Type of postingPosting date:time ESTSummaryScenariosDownloads
Post Landfall 412/6/2017 1:15:00 PM 
Post Landfall 39/25/2017 12:00:00 PM 
Post Landfall 29/22/2017 3:00:00 PM  
Post Landfall 19/20/2017 3:45:00 PM 
Landfall 9/19/2017 1:30:00 PM 
Posting Date: 9/25/2017 12:00:00 PM

AIR estimates industry insured losses for Hurricane Maria in the Caribbean will be between USD 40 billion and USD 85 billion. Puerto Rico alone accounts for more than 85% of the loss.

Note that these estimates include “demand surge,” which is the increase in the cost of labor and materials that is often observed in the aftermath of major catastrophes. Demand surge translates to an increase in the cost of rebuilding that ultimately results in higher insured losses than would otherwise be the case. Demand surge arises from shortages and potential constraints in the movement of labor, and it can be exacerbated when multiple disasters occur in a short timeframe, as is the case with hurricanes Harvey, Irma, and Maria.

There is considerable uncertainty, however, as to whether and to what extent demand surge will impact losses from Maria; the extended power outages in Puerto Rico—which may last months— will delay reconstruction efforts, and the governor of the island, Ricardo Rosselló, stated that he expects a significant and possibly permanent migration from the U.S. territory to the mainland. These impacts will likely temper pressure on prices. If demand surge is excluded from the loss estimates, the upper bound shifts down from USD 85 billion to USD 67 billion.   

Other sources of uncertainty in the loss estimates include:

  • Actual wind speeds (virtually all instruments were destroyed by Maria’s winds)
  • Radius of maximum winds, to which losses are quite sensitive, is not a metric reported by the National Hurricane Center in real time and must be inferred
  • The extent to which flood losses might be covered under insurance policies
  • The impact on time element losses of the extended power outages
  • Policy conditions (deductibles and limits) for industrial facilities

AIR’s modeled insured loss estimates include:

  • Insured physical damage to      onshore property (residential, commercial, and industrial) and autos due      to wind and precipitation-induced flooding
  • Insured loss to contents
  • 2017 indexed take-up rates
  • Losses due to business      interruption
  • Losses to industrial facilities
  • Additional living expenses      (ALE) for residential claims
  • For residential lines in the      U.S. territories of Puerto Rico and the U.S. Virgin Islands, 10% of      modeled precipitation-induced flooding damage under wind policies
  • For residential lines in      territories other than in the U.S. territories of Puerto Rico and the U.S.      Virgin Islands, 100% of flood losses
  • For commercial lines in the      U.S. territories of Puerto Rico and the U.S. Virgin Islands, insured      physical damage to structures and contents and business interruption      directly caused by precipitation-induced flooding, assuming a 10% take-up      rate for commercial flood policies
  • For commercial lines in      territories other than in the U.S. territories of Puerto Rico and the U.S.      Virgin Islands, 100% of flood losses
  • For business interruption      losses, direct and indirect losses for insured risks that experience      physical loss
  • Demand surge (see discussion      above)

AIR’s modeled insured loss estimates do not include:

  • Losses to infrastructure
  • Losses from hazardous waste      cleanup, vandalism, or civil commotion, whether directly or indirectly      caused by the event
  • Losses to offshore properties,      pleasure boats, and marine craft
  • Losses resulting from the      compromise of existing defenses (e.g., levees)
  • Losses to uninsured properties
  • Other non-modeled losses,      including loss adjustment expenses

Current Situation

Hurricane Maria has left the Caribbean and is moving north toward the Outer Banks of North Carolina, slowing and weakening as it goes. Hurricane storm–force winds extend up to 70 miles (110 km), mainly to the east of the center, and tropical-storm-force winds extend up to 230 miles (370 km).

Islands in the Caribbean devastated by the storm, and by Hurricane Irma two weeks earlier, are in the early stages of what will inevitably be a very lengthy recovery period. With the focus on humanitarian relief and communications challenging, it is still too soon for a comprehensive picture of damage to emerge, but it is abundantly clear that this has been a major catastrophe for the region.

More than 3 million people in Puerto Rico, for example, remain without electricity, drinking water, and gas; other essentials are in short supply. Communications are challenging, with 95% of cell phone towers reportedly toppled. Many towns have been cut off by landslides, floods, or torrents of muddy water ; widespread damage is reported. The mayor of Cataño on the northern coast reports, for example, that 80% of the homes in the Juana Matos neighborhood, which had fortunately been evacuated, are destroyed. Some looting was reported, and the island’s governor announced a nightly 6 p.m. to 6 a.m. curfew until Saturday morning. The Luis Muñoz Marín International Airport reopened Friday for limited commercial and military flights bringing emergency supplies. Planes also began to survey remote and inaccessible regions of the island to assess damage.

As heavy precipitation continued, the dam on the Guajataca River was significantly compromised and was deemed in danger of an imminent break Friday afternoon. Some 70,000 people downstream were advised to evacuate immediately. The dam is an earthen structure built in 1929 to provide drinking water, irrigation, and power generation. It has not failed, but remains in danger of doing so; a flash flooding warning was in effect for the region until 2 p.m., ET, today.


Doppler Radar Station Destroyed by Hurricane Maria on Puerto Rico. Source: National Weather Service, San Juan.

The Dominican Republic escaped the full force of Hurricane Maria, but tree damage, power outages, and widespread flooding were reported. According to the Emergency Operations Center, Maria destroyed 110 homes, damaged 570, and flooded another 3,723.

Forecast Track and Intensity

Hurricane Maria is expected to continue moving north for the next two days, slowing and weakening as it goes, and staying well east of the southeast coast of the United States. Maria will likely bring coastal flooding, high winds, and rain to parts of the North Carolina coast and Virginia Tidewater through Wednesday.  Maria is expected to have become a tropical storm by Tuesday night, to turn toward the north east by Thursday, and to dissipate mid-ocean.

Hurricane Maria
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