Hurricane Zeta insured losses trending upwards; RMS pegs up to $5bn

The projected losses to the re/insurance industry from Hurricane Zeta are trending upwards with risk modeler RMS expecting it to reach up to $5 billion and majority of it stemming from residential property lines.

Zeta was the twenty-seventh named storm of the "extremely active" 2020 North Atlantic hurricane season. It made landfall near Louisiana on October 28 as a Category 2 hurricane.

RMS pegs total onshore US insured losses from Zeta to be between $3 billion and $5 billion, including losses to the National Flood Insurance Program (NFIP) of between $200 million and $300 million.

These estimates are up from those revealed by AIR Worldwide, Karen Clark and Company (KCC) and CoreLogic. AIR has estimated insured losses to onshore property in the range of $1.5 billion to $3.5 billion, while KCC expects up to $4.4 billion excluding NFIP losses or losses to offshore assets. CoreLogic has estimated insured losses from wind and storm surge to be between $2.5 billion to $4 billion.

RMS estimate includes wind and storm surge losses across the impacted states, including Louisiana and Mississippi, reflecting property damage and business interruption to residential, commercial, industrial, and automobile lines of business. It also accounts for a 5 percent reduction in insured onshore losses due to the cumulative impacts of Hurricane Sally, which damaged some of the same region earlier this season.

RMS expects most insured losses will be from residential lines. Additionally, insured losses to offshore platforms are expected to not exceed $500 million.

In Mexico, RMS estimates insured losses from Zeta to be minimal. However, consistent with previous impactful tropical cyclone events this season, overall insured losses constitute a fraction of the total economic losses, particularly in Mexico which has significantly lower rates of insurance take-up compared to the US.

“We do expect some overlap between Zeta and Sally as the industry settles losses from these two events, but not to the degree of Delta and Laura a few weeks ago," said Jeff Waters, senior product manager, RMS North Atlantic Hurricane Models.

Rajkiran Vojjala, vice president, model development, noted: “Power outages and treefall-driven impacts were two key factors in Zeta. The storm’s fast forward speed brought damaging winds well inland, particularly in areas with an abundance of trees, including metro Atlanta. This, combined with already saturated soil conditions, led to one of the most significant power outages of the season. Some fallen trees also directly damaged buildings and vehicles. We expect these factors to amplify insured losses.”