Hurricane Debby private & public market insured loss seen below $2bn: Gallagher Re

According to broker Gallagher Re, hurricane Debby is expected to be a very manageable event for the insurance and reinsurance industry, with water driving a relatively significant proportion of a private and public market insured loss of up to $2 billion.

Having made landfall in the Florida Panhandle as a Category 1 storm, hurricane Debby slowly degraded and moved inland dropping inches of rainfall, before moving across the southeastern US and emerging back into the Atlantic where it regained 60 mph winds and made a second landfall in South Carolina.

Rains continue from Debby and so the flood related impacts could worsen. But on the wind damage front, reinsurance broker Gallagher Re says these are not going to be overly significant.

Recent historical Category 1 hurricane landfalls in Florida typically cause insurance market losses of up to or around the $1 billion level.

With Debby’s rainfall causing widespread flooding, the economic costs are going to be considerably higher, with Gallagher Re predicting a multi-billion-dollar economic loss total based on the rainfall and flood impacts across Florida, Georgia, the Carolinas, as well as additional water-related impacts possible in the Mid-Atlantic and Northeast.

However, that economic loss may also be in the single digit billions, while a low uptake of NFIP flood insurance policies will drive a protection gap for this event, the broker believes.

Water-related impacts are expected to drive the bulk of the losses that flow to the insurance markets, Gallagher Re says.

“Debby’s combined wind and water-related insured losses are likely to fall in the range of USD1 billion to USD2 billion for the private insurance market and public entities such as the National Flood Insurance Program (NFIP) or the USDA’s RMA crop insurance program,” Gallagher Re explained.

Adding, “This will be a manageable event for the re/insurance industry.”

The broker notes that the amount of flooding seen with Debby in the Carolinas was notably reduced from that seen with 2018’s hurricane Florence, that caused a $30 billion economic loss.

At this low level of insured losses, with the private market only going to take a share of the up to $2 billion, there will be little impact to reinsurance capital providers outside from ground-up quota shares.

The FEMA NFIP reinsurance would also be expected to be well out of reach of the loss quantum from hurricane Debby as well, unless the flood situation worsened dramatically now.