Insured losses from super typhoon estimated at up to US$700 million: AIR Worldwide

Relatively low insurance penetration in the wake of Super Typhoon Haiyan means insurable losses are also expected to be relatively low – as much as US$700 million – against a backdrop of staggering property damage estimates ranging as high as US$14.5 billion, AIR Worldwide reports.

In a statement Nov. 17, insured losses are estimated at between US$300 million and US$700 million compared to total damage to residential, commercial and agricultural properties of US$ 6.5 billion to US$14.5 billion, notes a statement from the catastrophe modelling firm.

AIR Worldwide notes estimates reflect insured physical damage to property (residential, commercial and agricultural) for structures and their contents as a result of wind and precipitation-induced flooding in the Philippines, the assumed take-up rates in the Phillipines, and current industry exposure for the Phillipines.

Loss estimates do not reflect losses to uninsured properties, losses to infrastructure, losses from storm surge, losses to crops, losses to auto, losses resulting from physical failure of flood defences, losses from hazardous waste clean-up, vandalism or civil commotion (whether directly or indirectly caused by the event), demand surge, business interruption and other non-modelled losses.

A crucial component of providing an accurate insured loss estimate is ascertaining the storm’s exact strength at landfall, AIR Worldwide reports. “However, this is a challenging task, particularly for Haiyan, given that no known anemometers in the vicinity of landfall survived the storm.”

To produce loss estimates, the company used track information from the Japan Meteorological Agency to model several different scenarios that reflect a range of radius of maximum wind values.

The estimated losses are greater than what catastrophe modelling firm EQECAT noted in an alert last week. “Although there is a probability of high value single facility insured loss, the aggregate insured loss from this event is not expected to exceed US$100 million,” the alert stated.

A.M. Best anticipated in a briefing late last week that insured losses would be minimal because of low non-life insurance penetration, “significantly less than 1% of gross domestic product.” The ratings agency expected “Haiyan to be an earnings event for reinsurers – minor for the large, global companies, but more substantial for smaller, regional players.”

The typhoon made landfall on the southern tip of Samar Island on the early morning of November 8 “as one of the most powerful tropical cyclones in modern record-keeping,” Peter Sousounis, senior principal scientist at AIR Worldwide, says in the statement. “The storm maintained impressive wind speeds as it traversed the Philippines before exiting over the cooler waters of the South China Sea, where it weakened as it headed northwest,” Sousounis continues.

The storm swept away small villages in its path, leaving more than 2,000 people dead and displaced more than 650,000 others.

Tacloban City, the capital of Leyte province, with a population of approximately 220,000, was particularly hard hit as storm surge depths as high as four metres “destroyed every coastal home and left many inland neighborhoods inundated with floodwaters,” Sousounis adds.

Many inland residential and commercial buildings were also destroyed, and the tiny peninsula where the Tacloban airport was once located was levelled.