Hurricane Harvey made landfall northeast of Corpus Christi, Texas, late on Friday 25th August as a category 4 hurricane with sustained winds of 130 mph, making it the strongest storm to hit the US in 13 years.

Although Harvey was downgraded to a tropical storm soon after making landfall, it has generated record rainfall in Houston and other areas owing to its lack of movement, and more rain is expected over the next few days.

Catastrophe modeller AIR Worldwide estimates that insured losses from wind and storm surge could range from $1.2bn to $2.3bn, but this excludes losses from ongoing rain and catastrophic flooding.  S&P Global Ratings has issued a mid-range estimate of $6 billion and stressed that at that level primary insurers would bear most of the loss because the reinsurance programmes in place in this part of the world do not for the most part come into play until losses reach higher amounts.  Investment bank, JP Morgan has issued a higher loss estimate than either, with an early estimate at $20 billion, which would engage reinsurers.  By way of comparison, Swiss Re’ Sigma Research puts the indexed cost (2016 dollars) of 2005’s Hurricane Katrina at US$81 billion and 2012’s Superstorm Sandy at $30 billion.

There is much speculation as to how much this event will generate both in economic and insured losses, with attention in particular on potential flood losses.  Although flood losses for homeowners are typically covered by the government National Flood Insurance Programme (‘NFIP’), owners of high valued homes buy excess cover in the commercial market.  The NFIP also buys some commercial reinsurance, while businesses will have flood cover in their property insurance policies.  As ever, losses where high winds have been followed by inundation with water give rise to disputes over the interpretation of policy language.

While the event is still developing, estimates of the amount of insured losses, where they will fall and the impact on the Lloyd’s market or on individual syndicates, are largely speculative.  

We will provide further reports as information emerges.