The good, the bad and the ugly of one of the most expensive storms in U.S. history

Authors: Martha Bane Robby Kunz

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Until Hurricane Ian made landfall in Florida on September 28, four Category 4 hurricanes had hit the U.S. since 2017: Harvey, Irma, Maria and Ida. Ian brought that tally to five. With the addition of category 5 hurricanes, Michael brings that count to six.

As Floridians begin the seemingly insurmountable task of rebuilding their lives, homes and businesses, we must ask, what lessons have we learned to better protect ourselves from future events?

The good: searching for Hurricane Ian's silver lining

We feel it's important to find some semblance of good news for Floridians who have been battered by negative statistics and headlines — a light at the end of the tunnel. Insurance as a vehicle for recovery should inspire hope for a future in which residents and businesses alike can return to the lives they enjoyed and not be scared away from their homes and communities.

A Gallagher Re assessment of Hurricane Ian1 points out that global tropical cyclone activity has shown no "statistically significant increase with time" since 1851, when the National Oceanic and Atmospheric Association (NOAA) began tracing storm paths. So while storms have seemed more frequent in recent memory, statistics suggest we are bound to enter a time of peace and quiet. The only question is when.

With each passing hurricane season, insureds in the Sunshine State undertake efforts to make their assets more climate resilient. Insureds who have proactively made these investments or retrofitted older buildings may find that Hurricane Ian was a proof of concept for those investments and is money well spent.

For example, a report from artificial intelligence solutions provider Arturo2 noted that metal roofs are designed to withstand hurricane-force winds of up to 160 mph, clay/concrete tiles are rated for 130 mph, and brand-new asphalt shingles typically fail at wind speeds of about 110 mph. For roofs with older or reclaimed asphalt shingles, wind resistance can drop as low as 50 mph.

Hard-hit communities in Ian's path experienced wind speeds of up to 140 mph. Fortunately, many homes in those regions were built — or rebuilt — after building codes were updated to require that homes can withstand wind speeds that the American Society of Civil Engineers (ASCI) predicts will return every 700 years. As this table from the Gallagher Re Hurricane Ian assessment1 shows, Hurricane's Ian's wind speed was below the 700-year wind speed for five example communities. If nothing else, this data should inspire confidence that Florida can build back better, stronger and more resilient.

Florida location
 ASCE-7 Design Standard: Mean Recurrence Interval Wind Speed Estimated Ian Wind Speed
50-year 100-year 700-year
Bonita Springs 117 mph 129 mph 159 mph 100-115 mph
Fort Myers Beach 118 mph 129 mph 159 mph 120-140 mph
Punta Gorda 113 mph 124 mph 151 mph 125-140 mph
Cape Coral 115 mph 127 mph 155 mph 125-140 mph
Kissimmee 105 mph 115 mph 140 mph 75-85 mph

The bad: Storms are getting bigger, stronger, wetter and slower

Although tropical cyclone activity hasn't statistically increased with time, the storms themselves have changed. Hurricanes hold more water, linger longer over land and move slower, especially in lower-lying areas. This change — for which climate change is believed to be the key driver — leads to more water damage and flooding.

A recent study3 about water risk and resilience found that:

  • Between 2022 and 2050, economic losses due to water-related risks could erase $5.6 trillion worth of global gross domestic product (GDP), and storms are projected to account for 49% of that number or $2.7 trillion.
  • The global water cycle is changing in such a way that the volume of rainfall is increasing storm and flood risks.
  • Extreme water events like storms, floods and droughts affected 100 million people in 2021 alone.

With Hurricane Ian, we are largely looking at water-driven losses rather than losses caused by wind. Gallagher Re Chief Science Officer Steve Bowen and his team were on-site in Florida in the immediate aftermath of the storm. They observed storm surges as far inland as 0.40 miles with depths topping 15 feet.1 And while improvements in roof construction can mitigate wind losses, little can be done to alleviate the destruction of the storm surge.

In an interview with The Insurer, the leader of Gallagher's Global Property practice, Martha Bane, said that Ian was "a huge reinsurance event." The magnitude of losses impacting primary insurers has seen many carriers report that they will draw upon their reinsurance agreements. Bane pointed out that Florida has remained one of the most volatile segments of the property marketplace, even as other parts of the U.S. were starting to see moderating property renewal rate increases.

On the back of losses from Ian, we expect that there will be a significant supply-and-demand imbalance during January 1st reinsurance renewals. Primary insurers will be seeking greater capacity as reinsurers retrench and are expected to draw back capacity.

The most impactful variables for insureds will be:

  • Were adequate replacement cost valuations maintained to secure proper insurance to value?
  • The scope of the damage will create demand push inflation, which will further compound elevated reconstruction costs already in jeopardy from supply chain issues, labor shortages and global inflation.
  • Will debris-removal sublimits in policies be sufficient to cover cleanup costs?

Hurricane Ian Loss Cost Estimates

The following numbers are preliminary estimates of insured losses from catastrophic risk modelers. As reported by Verisk, the average insured losses from natural catastrophes over the past five years is $100 billon. At the time of this writing, the average estimate for Hurricane Ian is $60 billion. Hurricane Ian is already expected to exceed half of the $100 billion average annual loss in a single event.

An RMS update on October 10 notes that Ian has the potential to be "one of the largest, if not the largest" insured catastrophe losses in U.S. history."

Organization Estimate (bns) Date 2022
Verisk $57 10/3
CoreLogic $53 10/7
Fitch Ratings $40 9/29
RMS (Wind only) $74 10/7
Stonybrook $75 10/10
Karen Clark & Co. $63 9/30
Average $60

The ugly: The human impact

After the rain subsides, the clouds clear, and the winds cease to blow, we remember the most important consideration of a natural disaster: the human impact. As of late October, NOAA reports that Ian claimed 131 lives in the path of its destruction.

At the heart of every natural catastrophe are the community and people who live there. Human recovery efforts must be the most important focus of cleanup and rebuilding efforts. Claims are being filed; doctors, nurses and volunteers are arriving; and Floridians are beginning to pick up the pieces.

At Gallagher, we are keenly aware of the human impact of Hurricane Ian. We have partnered with local and national charities to aid in Florida's recovery where many of our friends, colleagues and loved ones live, work and play.

As a community insurance broker and trusted local consultant, we help people and businesses move forward with confidence. At Gallagher, we believe in doing the right things the right way — The Gallagher Way.

Author Information

Sources

1"Gallagher Re's Assessment of Damage Caused by Hurricane Ian," Gallagher Re, 18 Oct 2022. PDF download.

2"Hurricane Exposure: The State of Gulf Homes," Arturo, 2022. PDF file.

3"Aquanomics: The Economies of Water Risk and Future Resiliency," GHD, accessed 28 Oct 2022.

4"Gallagher's Bane: Florida Commercial Property Buyers Facing Capacity Shortage in 2023," The Insurer, 16 Oct 2022.

Disclaimer

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