Written by Frank Eldridge and Matt Hene
In recent weeks, three major hurricanes have made landfall in the Caribbean and the continental United States. Hurricanes Harvey, Maria and Irma left widespread damage throughout the Caribbean and Puerto Rico, as well as, the East and Gulf coasts of the United States. While many in the affected areas have had power and water services restored, others are still without these vital services. While these storms have proven to be costly, businesses that have insurance coverage are experiencing a slow and tedious claims process.
The occurrence of multiple hurricanes causing such significant damage within days of one another is unprecedented. The influx of losses has insurance companies scrambling to deploy adequate resources to effectively manage the flow of claims. This shortage of resources has created a demand for services that goes beyond what is available in the marketplace. Therefore, costs and fees for such services will continue to increase, ultimately affecting the total cost of claims.
Analysts expect that a large amount of insured losses will be business interruption claims as a result of damaged and flooded properties as well as loss of power. Due to the lack of resources previously mentioned, claim adjusters are unable to adjust claims in a timely manner which can cause further damage and loss of business. The delay of assessing a loss can extend harmful conditions causing further damage, such as mold. While the affected areas are slowly returning to “normal”, there are still businesses that remain without power, water and other necessities which continue to pose health concerns and increase the threat for additional loss.
With each passing day, the size and scope of the direct and indirect damage effect of these storms comes into clearer focus. According to Risk Management Solutions Inc., the insured losses within the U.S. and Caribbean could reach anywhere from $35 billion to $55 billion from Hurricane Irma alone and the total economic loss could be as high as $95 billion. Estimates for insured losses from Maria could be as much as $30 billion with a potential economic impact of $85 billion. And losses from Harvey could reach $35 billion with a total economic impact of $90 billion.
While the insurance market has sufficient capital to absorb these losses, it is important to remember that the hurricane season does not end until November 30th and another tropical storm (Nate) is strengthening and heading towards the Gulf Coast. With that said, it is too early to tell how the markets will ultimately respond and how or if markets will change their underwriting position. We believe underwriters may restrict terms and conditions and increases rates based on the class of business, geography, modeling results and loss experience but the long-term effect is still an unknown.
It is never too late for a business to create and implement a disaster preparedness and recovery plan. Having an effective plan in place prior to a catastrophic event can help minimize the impact of property, including loss of income, and liability losses following the event.
To learn more about what makes Ironwood Insurance Services a trusted partner for all risk management and insurance needs, please contact us by going to www.ironwoodins.com. You can also follow us on LinkedIn, Facebook and Instagram.