’Wind versus water’ claims disputes to arise post Ian, with full recovery likely to “take years”

Mohsen Rahnama, chief risk modeling officer at RMS has warned there could be debate over whether losses relating to Hurricane Ian were caused by wind or flood. He also expects to see claims inflation as a result of demand surge (where the cost of materials and labour goes up post catastrophe).

While the catastrophe modelling firm has yet to issue a loss estimate, Rahnama says Ian is likely to be one of the costliest events in Florida’s history.

“Major Hurricane Ian is a historical event and very complex – a Category 4 event with a maximum 150 miles per windspeed and a 50-kilometer radius, massive record storm surge, and inland flood, all points to Ian most likely being one of the costliest events in Florida,” he said in a statement.  

Some losses will be uninsured

“The split of losses between wind and storm surge will be contentious, and also to understand what portion of loss will go to primary, reinsurance layers, and retro – and then to understand what will be covered by National Flood Insurance Program (NFIP) and what is in the gap and uninsured.”

“Claims leakage will focus on factors from loss amplification due to constraints in rebuilding supplies and contractors, through to another big wildcard – inflation, which will percolate through the system in several ways.”

The current inflation situation pre-Hurricane Ian and any shortage of materials and qualified contractors in Florida will amplify repair costs.

“I believe the repair will be in multiple stages, starting with a quick functional repair followed by the major repair - which requires a permit and qualified contractors,” continued Rahnama. 

Loss creep could rear its head

Considerable infrastructure damage from Ian will also slow down the recovery and exacerbate the repair time and losses. This is especially the case for islands disconnected from the mainland due to bridges and piers damages. RMS expects the full recovery to take a few years.

“As shown in the recent events, particularly Hurricane Irma in 2017 where many cases ended up in the litigation process, we saw increases in claims cost,” said Rahnama. “For Ian, we expect that some of the claims’ closers will take more than a year due to potential litigation.”

“Basically, I believe this event will change the Florida insurance market landscape.”