Hurricane Arthur’s Insured Losses Below $250M: RMS

August 4, 2014

Insured losses from Hurricane Arthur will not exceed $250 million from wind and coastal flooding, catastrophe risk modeling firm RMS said.

According to RMS, the expected loss covers damages to:

  • Residential, commercial, industrial properties
  • Automobile and watercraft lines of business
  • Business interruption resulting from power outages or damage to property

On July 3, Arthur made landfall along Shackleford Banks, between Cape Lookout and Beaufort at the southern end of North Carolina’s Outer Banks as a Category 2 hurricane on the Saffir Simpson Scale. The hurricane passed quickly over the Outer Banks of North Carolina and weakened to a Category 1 before tracking offshore of Massachusetts on the night of July 4.

“Arthur is the first hurricane to make landfall in the U.S. since Hurricane Sandy in 2012. What is unusual about Arthur, particularly for this time of year, is that it rapidly deepened to become a category 2 hurricane,” said Brian Owens, senior director, business solutions at RMS.

“It’s also rare for hurricanes to form in early July, which climatologically is the quietest time of the hurricane season.”

Inland flooding losses are expected to be a minimal proportion of the total insurance industry loss, as the areas affected are primarily residential. These losses will either be covered by the National Flood Insurance Program or will be excluded perils from many insurance policies. The RMS estimate does not include losses to theNFIP or inland flood loss.

Approximately five percent of the estimated event loss is associated with coverage leakage. Coverage leakage is the escalation in claims severity for wind-only policies in circumstances where wind and water hazards coexist in residential lines of business.

In North Carolina the main driver of loss from Hurricane Arthur is from wind and coastal flooding. The storm impacted mostly residential properties. Residential insurance policies typically provide cover for surge-driven flood losses.