The devastation wrought by Hurricane Dorian is likely to lead to insurance payouts of up to $3bn in the Bahamas, as the first big storm of the Atlantic season continued to bring flood warnings and high winds to the US eastern seaboard.
The category five hurricane caused at least 30 deaths and destroyed thousands of properties as it smashed through the Bahamas earlier this week, with the death toll expected to rise. Dorian was the strongest recorded Atlantic hurricane ever to make landfall, with winds that reached 300kph, according to insurance broker Aon.
Hubert Minnis, prime minister of the Bahamas, told US National Public Radio of the “mind-boggling” destruction on the Caribbean island, where storm surges of more than 6m submerged homes and businesses. In some areas, 60 per cent of properties have been damaged, according to early estimates.
“We have experienced hurricanes before. The islands have been partially destroyed and been rebuilt, but we have not experienced anything this big,” Mr Minnis said.
AIR Worldwide, a risk modelling group, put the damage to the Caribbean island at up to $3bn. As many homes on the islands are uninsured, the total cost of the disaster will be well above that figure. According to AIR worldwide, less than a third of homes on Great Abaco island have insurance, while on Grand Bahama that figure is 50 per cent.
The Bahamas could be in line to receive a payment from a catastrophe risk facility backed by the World Bank which is designed to limit the impact of natural disasters, although it was unclear to what extent the devastation will be covered.
Dorian has since moved towards the eastern coast of the US, bringing hurricane force winds and storm surges to Florida and Georgia on Wednesday and Thursday. It has now weakened to a category one hurricane, with lower wind speeds of about 150kph. On Friday that hurricane brought high winds and flood warnings for low lying coastal areas of North Carolina.
Although there are likely to be more costs to come for insurers from damage caused in the US, Dorian will not be as expensive for the industry as first feared. There were concerns last weekend that the hurricane could hit Florida, a densely populated and heavily insured state where claims would have been much higher.
The insurance industry has faced two consecutive years of heavy losses from natural catastrophes. Insurers paid out more than $140bn as hurricanes Harvey, Irma and Maria hit the US and the Caribbean in 2017. Last year there were more than $80bn of insured losses, according to reinsurer Swiss Re, following a succession of storms and wildfires.
Jay Guin, AIR Worldwide chief research officer, warned that climate change would have an impact on storms in the years to come. “Hurricane frequency will decrease, but they will be more intense and with more rainfall,” he said.