Insured Losses In The Caribbean

The 2017 hurricane season has been one for the history books. Even if you don’t follow the insurance space, the main stream media news cycle has been inundated with images of destruction, especially in the Caribbean. According to the catastrophe modeling firm AIR Worldwide, industry losses in the Caribbean from Hurricane Maria will result in somewhere between $40 and $85 billion in losses.

Perhaps even more staggering is that Puerto Rico alone will account for 85% of those losses. Puerto Rico is completely devastated, and some experts suggest that it could take up to a decade for their infrastructure to be rebuilt. Unfortunately, the state of emergency on Puerto Rico, and many of these islands, is still an ongoing issue and until we know the exact extent of the damage, we will not know the exact fiscal cost.

The total damage was compounded by the back-to-back timing of hurricanes Irma and Maria. While some islands managed to escape Irma, they were then hit by Maria and visa-versa, leading to the situation we have now–a devastated caribbean.

AIR detailed how they arrived at these damage costs, explaining that they took into account demand surge and physical damage to onshore property. Demand surge, refers to the increased cost of labor and materials that often occurs after a major catastrophe. While these methods may lead to what some people think is an inflated estimate, AIR did not include losses to infrastructure, hazardous waste cleanup and vandalism, making their estimate more or less accurate in the end.

AIR points that the islands that were affected by Irma and Maria are in the very early stages of a long recovery period, and that as more information becomes available, a more accurate estimate can be made. For now, the total devastation is merely an estimate as places like Puerto Rico find themselves still in the midst of a very real emergency. How much will the total cost be? Time will tell, but AIR believes at the very least we’ll be looking at $40 billion in losses.

Sources:

http://www.insurancejournal.com/news/international/2017/09/26/465440.htm