UBS research shows that insurers may face tens of billions in losses because of the intense storm.
Hurricane Dorian damage may cost over $25 billion in claims payouts from insurance companies, according to international financial services firm U.B.S.
Damage to the Bahamas, the US coast and Canada was widespread and substantial.
The bank had initially predicted that there would be between $5 and $40 billion in damage caused by the storm. More recently, U.B.S. narrowed its forecast to $15 billion as more specific Hurricane Dorian damage data became available. Now, the bank has increased that prediction to $25 billion in insured damages,reported Insider.com.
The National Hurricane Service has labeled Hurricane Dorian as the most powerful Atlantic storm recorded since the Labor Day hurricane in 1935.
According to U.B.S., reinsurers were able to build $30 billion in excess capital during the two year span that stretched between Hurricane Maria in 2017 and the storm from earlier this month. That said, the bank has also predicted that the insurance industry losses from Dorian will require nearly that entire reserve and may cause reinsurers to increase their prices.
Hurricane Dorian damage could have been substantially higher if it had moved in on Florida.
The catastrophic storm unexpectedly hung over the Bahamas over Labor Day weekend, nearly parking itself, it moved so slowly. The enormous storm moved at a rate of only one mile per hour as it hovered over the Bahamas, leaving devastation behind and essentially wiping out the Grand Bahamas island. From there, the storm’s path was expected to take it straight up Florida’s center, but as it left the Bahamas, it changed its trajectory and remained centered well off the Florida coast.
Instead, it bounced its way up the U.S. east coast, causing flooding, wind damage and even tornadoes in affected states. Once it had moved far enough north, its core temperature fell by enough to be labeled as an extra-tropical storm, though it still maintained the wind intensity of a Category 2 hurricane. It slowed to Category 1 speeds before cutting straight through the Canadian provinces of Nova Scotia, New Brunswick, Prince Edward Island and Newfoundland. Much of those regions sustained considerable wind damage and flooding, leaving hundreds of thousands of people without power for many days.
The “unique” landscape of the region struck by Hurricane Dorian damage is placing the insurance industry at a rising risk, said UBS in its report.