Harvey private and public insured losses could reach $40bn: Morgan Stanley

September 05, 2017

Analysts at Morgan Stanley have suggested that insured losses emanating from Hurricane Harvey could total between $15bn and $40bn, which includes claims from the government-backed flood insurance scheme.

Economic loss estimates have so far varied, with RMS estimating a total loss from the storm at as much as $90bn.

Morgan Stanley said that while insured losses have historically accounted for around half of total economic losses, the insured loss from Harvey could be less, as many homes in the region do not have flood coverage.

The analysts noted that a $40bn insured loss would make Harvey the second most costly hurricane to hit the US after Katrina in 2005, which triggered around $80bn in insured losses, and would be above the $30bn loss caused by Sandy.

The top-end $40bn insured loss projection includes $5bn– $15bn of National Flood Insurance Program (NFIP) claims and a further $5bn-$15bn from commercial flooding claims. Meanwhile, it is estimated that auto insurers could pay out $3bn-$6bn while wind damage may range from $2bn-$4bn.

Morgan Stanley said that commercial flooding losses “are a wild card and difficult to estimate”, basing its projection on the c.$3.5bn industry losses caused by Tropical Storm Allison in 2001, which also caused extensive flood damage in Houston. The area's population has increased 20 percent since that event.

“Similarly, it is highly difficult to estimate NFIP claims,” continues Morgan Stanley.

The NFIP paid out roughly $1.1bn from approximately 30,000 claims during Allison, citing RMS estimates of 500,000 NFIP policyholders being affected by Harvey as the basis of their projection.

“We expect reinsurers to share a significant portion of the overall losses but the breakdown is unclear due to various reinsurance on individual commercial policies. If NFIP losses exceed $4bn, 25 reinsurers will also share up to c.$1bn NFIP claims,” says Morgan Stanley.