Hurricane Charley loss estimates rise

Early insured loss estimates from Hurricane Charley, which made landfall in Florida over the weekend, now run as high as US$10 billion.
Risk modeling firm AIR Worldwide says insured losses should range between US$6-$10 billion, while Risk Management Solutions has upped its estimate to US$6-$8 billion its earlier US$5 billion did not take losses in the Carolinas into account.
However, even if Charley comes in at the low end of these estimates, it will still rank as the third highest hurricane loss in U.S. insurance history, notes Fitch Ratings. In an early report, the rater says the storm, which hit Florida’s Gulf Coast as a category-4 hurricane, should not affect insurer and reinsurer ratings generally, as most of the major writers impacted have a large and geographically diverse book of business. This will, however, be the first true test for the new Bermuda “class of 2001”, representing the first major catastrophe loss.
Charley made landfall at Sanibel Island, off the coast of Fort Meyers Florida, and weakened to a category 1-2 hurricane as it traveled northeast through Orlando. While packing sustained winds as high as 145 mph, Charley cut an unusually narrow path, risk modelers note. Charley had weakened to tropical storm intensity as it traveled north to the Carolinas.
Losses could reach the point at which the Florida Hurricane Catastrophe Fund, the government reinsurance backstop, kicks in. The fund covers losses above the industry’s US$4.5 billion to a maximum US$15 billion per season, with an insurer retention of at least 10% above the deductible. The insured loss estimates do not factor in losses covered by the National Flood Insurance Program.
The Property Casualty Insurers Association of America (PCI) says members are reporting damage from Charley is far less than that experienced with Hurricane Andrew in 1992, the worst storm to hit the state. Not only was Charley an uncharacteristically narrow storm, but PCI says this event demonstrated the lessons learned from Andrew in terms of better building structures and roofing.