Stonybrook Capital Says Hurricane Ian Is Largest-Ever Insured Loss Event at Over $75B

According to Stonybrook Capital, the damage from Hurricane Ian will result in the largest-ever insured loss event in nominal dollars.

The advisory and investment banking firm focused on the insurance industry said the all-in insured loss and loss adjustment expenses (LAE) from Hurricane Ian is over $75 billion – “perhaps significantly over,” Stonybrook added, and that losses represent over 10% of U.S. 2022 P&C industry direct premiums.

“Likely over 10 points on the national direct loss ratio, Ian only lists behind the 2001 terror attacks and 2005 Hurricane Katrina and matches or may even be a bit higher than the 1938 New England hurricane. As this becomes recognized, the market effects will be profound and widespread,” Stonybrook said.

Stonybrook noted each estimate from risk modelers Karen Clark & Co., Verisk, RMS, and CoreLogic and said each “exclude LAE, and some non-modellable exposures, such as Marine.”

“LAE has generally been notably higher in larger events,” Stonybrook added, and will likely be a factor specifically in the affected areas on Southwest Florida due to the travel distances from unaffected areas, which will impact investigations and repairs. “We expect that Ian’s property wind losses will cost over 20% to adjust and it will be moderately elevated for other coverages,” Stonybrook said.

Close to a year’s after-tax earnings will be lost from global reinsurer portfolios, Stonybrook said. Reinsurers will “critically assess their catastrophe appetites worldwide.”

In Florida, Stonybrook said the policy count of state-run, insurer of last resort Citizens Property Insurance Corp. was already growing because private, domestic insurers has started running off their books, and “more will soon follow.” Citizens’ premium volume could double in 2023, with much less reinsurance support, Stonybrook predicted. Since private insurers back Citizens, their willingness to continue writing business in Florida “may reflect concerns about this increasing risk.” The firm expects more downgrades of domestic insurers.