Hurricane Dorian could hit the insurance industry with more than $25 billion in losses, UBS says
- Hurricane Dorian could cost insurers more than $25 billion, according to recent research from UBS.
- The analysts said the storm could bring total losses of as much as $40 billion, depending on where it lands on Florida's coast.
- Though reinsurers have built up $30 billion in excess capital since 2017's Hurricane Maria, UBS estimates Dorian could wipe out reserves and lead the companies to raise their prices.
- Read the latest coverage of Hurricane Dorian here.
Hurricane Dorian could cost insurance companies more than $25 billion after battering the Bahamas and surging over Florida's east coast, according to UBS analysts cited by CNBC.
The bank recently widened its loss estimate and now expects Dorian to cause between $5 billion and $40 billion worth of damage. It also increased its base case for the storm's impact on insurers to $25 billion from $15 billion.
Dorian is the most powerful storm to hit the Atlantic since the 1935 Labor Day hurricane, according to the National Hurricane Service.
UBS noted that the two-year gap between 2017's Hurricane Maria and Dorian allowed reinsurers to pull together $30 billion in excess capital. UBS estimates Dorian will wipe out the reserve and potentially lead reinsurers to raise prices.
The hurricane pummeled the Bahamas over Labor Day weekend and is expected to make landfall in Florida Tuesday, according to the National Hurricane Center. Forecasts show the storm weakening and increasing in size as it creeps up the US's east coast throughout the week.
Dorian is expected to reach Georgia on Wednesday and South Carolina Thursday morning.
A Friday note from UBS compared Dorian to 2004's Hurricane Jeanne, which took a similar trajectory and caused about $5 billion in insured losses.
Risk Management Solutions estimated Jeanne would have caused about $13 billion in damages today based on current demographics and costs in the affected area. The risk-modeling company used Jeanne's path, population growth, and inflation data to set Dorian's estimated damages between $11 billion and $37 billion.
The region's "unique" insurance landscape places greater risk in reinsurers, UBS said in its note on Friday. Major insurance companies have relatively little market share in Florida compared to regional providers. The local insurance companies tend to heavily rely on private reinsurance plans and the state's Hurricane Catastrophe Fund, the analysts said.
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