17 September 2014 Insurance

Hurricane Odile will hit US carriers

Hurricane Odile, the category three storm which has hit Mexico’s Baja California peninsula over the past few days, is likely to cause significant losses for some US carriers, according to Robert Muir-Wood, chief research officer, Risk Management Solutions (RMS).

The area, which Muir-Wood describes as “like a US colony”, has high-value homes and several hotels—most of which are likely to be insured.

“This was a category four offshore and category three by landfall hurricane and the worst event ever witnessed at this location,” said Muir-Wood.

Describing the event as an example of a large incident within a heavily concentrated area, he said: “As the hurricane was a direct hit, a small number of US carriers are going to experience an appreciable loss.”

The East Pacific off the coast of Mexico has been very active this year, experiencing seven intense hurricanes—more than twice the average number.

“One big question is whether the hotels can re-open in time for the winter which is likely to be their most profitable period. If not, they need to decide whether they want to keep their business interruption running,” added Muir-Wood.

Another topical point included the development of further flood models.

“If you think of tsunami and river flood as unconnected with tropical cyclones, those are very big factors in driving losses alone and more and more flood insurance is being written,” said Muir-Wood.

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