Insured losses from Hurricane Arthur won’t exceed $250 million

Insured losses from Hurricane Arthur, which struck the United States and Canada earlier this month, are not expected to be above $250 million from wind and coastal flooding, catastrophe modeling firm RMS reported Friday.

Arthur made landfall July 3 along Shackleford Banks, between Cape Lookout and Beaufort at the southern end of North Carolina’s Outer Banks as a Category 2 hurricane, according to RMS.

The storm then passed quickly over the Outer Banks of North Carolina and weakened to a Category 1 hurricane before tracking offshore of Massachusetts on the night of July 4, RMS said.

It then made a second landfall as a post-tropical storm in Nova Scotia.

The expected losses cover damage to residential, commercial and industrial properties; automobile and watercraft lines of business; and business interruption from power outages or damage to property.

In North Carolina, wind and coastal flooding drove most losses, while in Massachusetts and Nova Scotia, localized inland flooding from the rainfall of the storm was the main loss driver. Damage from wind and coastal flooding was minimal, RMS said.

“Arthur is the first hurricane to make landfall in the U.S. since Hurricane Sandy in 2012,” Brian Owens, senior director, business solutions at RMS noted in the firm’s statement Friday.

“What is unusual about Arthur, particularly for this time of year, is that it rapidly deepened to become a Category 2 hurricane,” he added. “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, according to RMS.

Those losses will either be covered by the U.S. National Flood Insurance Program (NFIP) or will be excluded perils from many insurance policies.

RMS’ loss estimate does not include losses to the NFIP or inland flood loss and post-event loss amplification is not expected to be a factor from Hurricane Arthur, it noted.

Roughly 5% of the estimated event loss is associated with coverage leakage, the escalation in claims severity for wind-only policies in circumstances where wind and water hazards coexist in residential lines of business, RMS also said.

The RMS estimate is based on hazard reconstructions of Arthur’s windfield and storm surge footprint, in addition to an analysis of the damage reports.