Initial estimates of losses related to Hurricane Matthew are back up after a moderating period as flooding in North Carolina breaks levees and continues to push up the storm’s death toll. But while Goldman Sachs now expects the storm to cause nearly $10 billion in damage, CoreLogic’s original estimate of insured losses remains at $4-6 billion.
Unprecedented flooding in North Carolina led to a state of emergency declared for all of the state’s 100 counties, along with evacuations and more than 2,000 water rescues. As much as 18 inches of rain have fallen across the state, leading to inland water runoffs that have caused streams and rivers to overflow and break levees.
And with the focus on public safety rather than property loss, many homeowners stand to face steep bills once damage is calculated.
While the storm is likely to see at least some increased insurance costs and new areas subject to mandatory flood policies, however, the vast majority of homeowners in the state are uninsured for flood damage. For those reasons, insurers are likely to bear just half of all total expenses incurred through cleanup efforts.
Also contributing to the more moderate bill are higher deductibles in many homeowners polices.
J. Robert Hunger, director of insurance for the Consumer Federation of America, estimates that homeowners near the coast opt for a roughly 5% deductible on certain portions of their policy, including wind damage.
In that case, a homeowner with a $200,000 policy on their home would be responsible for $10,000 of the repair costs.
“A significant part of the risk is now back on homeowners,” Hunter said.
All of this means significant rate increases for the majority of property owners in the Southern US are unlikely – even those insured through the group of relatively young, Florida-focused insurance companies.
Insurers also benefitted somewhat from strong building codes in Florida and throughout the region, said Chris Hackett, senior director of personal lines with the Property Casualty Insurers Association of America (PCI).
“I think that conscientiousness will show with reduced property damage and losses,” Hackett told
Insurance Business America, adding that as rates are developed over the long-term, it is unlikely any one event – like Matthew – would disrupt premium pricing.
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