RMS pegs Hurricane Nicole insured losses at $2bn but warns of major uncertainties

RMS, a  Moody’s Analytics company, has revealed its first estimates of total private market US insured losses from Hurricane Nicole, which wreaked havoc on an already battered Florida coastline last week. The risk modeller expects “significant uncertainties” in the loss attribution and claims settlement process due to the overlapping nature of the hurricane just a few weeks after Ian.

RMS projects less than $2 billion, with the best estimate of $1.6 billion, in private market US insured losses from Nicole, with additional losses to the National Flood Insurance Program (NFIP) expected under $300 million.

The estimates reflect insured wind, storm surge, and inland flooding impacts for the US.

Privately insured wind and storm surge losses are expected to be in the range of $1.2 billion to $1.8 billion, RMS said, based on analysis of ensemble footprints in Version 21 of the RMS North Atlantic Hurricane Models.

RMS modelers developed and validated the wind, storm surge, and inland flood reconstructions and corresponding loss estimates using publicly available observations, including wind stations, river gauge water level data, and web reconnaissance.

The NFIP losses come primarily from Florida and Georgia, reflecting property damage and business interruption to residential, commercial, industrial, and automobile lines of business, and considering sources of post-event loss amplification (PLA), inflationary trends, and non-modeled sources of loss.

RMS expects the majority of wind and storm surge losses to come from Florida, and the majority of the NFIP and insured flood losses to come from both Florida and Georgia. These losses were derived using the RMS view of NFIP exposure based on policy-in-force data published by FEMA, the Version 21 RMS North Atlantic Hurricane Models, and the RMS US Inland Flood HD Model.

Jeff Waters, staff product manager, North Atlantic Hurricane Models, RMS, said: “Even though Hurricane Nicole was much less intense than Hurricane Ian a few weeks prior, it exhibited a large wind field that impacted many of the same areas in Florida. RMS Event Response teams estimate that roughly 98 percent of postal codes in Florida impacted by Nicole were previously impacted by Hurricane Ian. Similar to other overlapping events from previous seasons, such as Hurricanes Ida and Nicholas in 2021, and Laura and Delta in 2020, we expect the overlapping nature of Hurricane Ian and Nicole to introduce significant uncertainties in the loss attribution and claims settlement process.”

Sarah Hartley, manager, event response, RMS, added: “Historically, an event of Hurricane Nicole’s magnitude would not exhibit notable PLA impacts if it were to occur on its own. However, the fact that it closely follows a major event with Hurricane Ian, means that the same factors influencing PLA from Ian also apply to Nicole, including shortages of labor, materials, and claims adjusters. This is an example of compounding PLA effects.”

Hurricane Nicole was the fourteenth-named storm of the 2022 North Atlantic hurricane season, the eighth hurricane, and the second hurricane to make US landfall this season. Nicole made landfall on November 10, 2022, near Vero Beach, Florida as a Category 1 hurricane on the Saffir-Simpson Hurricane Wind Scale with maximum sustained winds of 75 miles per hour (120 km/h).

The storm brought a combination of strong winds, storm surge, and heavy rainfall to coastal and inland areas of Florida, including many that are still recovering from Hurricane Ian. Hurricane Nicole briefly re-emerged into the Gulf of Mexico as a tropical storm before weakening to a tropical depression and moving back onshore, tracking northward through the southeast US, the Carolinas, and mid-Atlantic regions.

Prior to impacting the US, Nicole hit parts of the Bahamas as both a tropical storm and Category 1 hurricane. However, RMS expected insured losses to be minimal in that region.

There are two weeks left in the 2022 Atlantic Hurricane season, which officially ends on November 30.

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