Hurricane Lane hits Hawaii

Hawaii has been hit with strong winds and torrential rain as Hurricane Lane approaches the US state, causing flash flooding and landslides, according to an Aug. 24 BBC News report.

As the hurricane neared the islands of the Aloha state, it brought winds of 125 mph (200 km/h) and heavy rainfall.

President Donald Trump earlier declared a state of emergency for Hawaii.

Downgraded to a Category 3 storm on Thursday afternoon by the Central Pacific Hurricane Center, Hurricane Lane threatens to cause considerable economic and insured losses in Hawaii, particularly if Lane shifts northeast and tracks through more densely populated areas, according to Fitch Ratings. Considerable rainfall and wind across the entire island chain is anticipated, with significant storm surge and heavy flooding.

The companies with the five largest homeowners' exposures to these events, as measured by statutory direct written premium, include large national insurers State Farm Group, Heritage Insurance Group (including Hawaii focused Zephyr Insurance Company), USAA Group and Allstate Insurance Group, as well as Honolulu-based insurer First Insurance Co of Hawaii (owned by Tokio Marine Holdings), Fitch noted.

In commercial lines, when combining the statutory direct written premiums for inland marine, commercial multi-peril (non-liability), fire and allied lines, the companies with the largest market share in Hawaii include First Insurance Co. of Hawaii, American International Group, Allianz Global Risks US Insurance, DB Insurance and Liberty Mutual Insurance Group.

Exposure to the reinsurance industry would principally be experienced through aggregate catastrophe treaties in which Lane could add losses from primary cedants that have reported losses from other events throughout the year, Fitch explained. Favourably, global reinsurers have experienced only modest losses thus far in 2018, allowing the industry to replenish its capital following the near-record catastrophe losses in 2017 from hurricanes Harvey, Irma and Maria, the agency added.

There are several outstanding catastrophe bonds that include Hawaii in their exposure to hurricane/named storm risk, but attachment points are typically high in the primary company's reinsurance programme structure, requiring a substantial loss for the catastrophe bonds to respond. The bonds also typically have per-occurrence triggers meaning that any losses sustained earlier in the year from the Mount Kilauea volcano eruption would have no bearing on potential losses from Lane.

The last storm to make landfall in Hawaii with hurricane-level strength came in 1992, when Hurricane Iniki made landfall as a Category 4 hurricane with 145 mph wind speeds. The National Hurricane Center estimated that this storm caused $5.5 billion (in 2017 dollars) of economic damage, Fitch noted.

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