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<div class="mainsection articledetails">
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            <label class="mngtag">Risk Management</label>
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    <h2 class="headArticle">Harvey to hit insurers hard</h2>
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                        <label> Matthew Lerner</label>

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    <label class="mngDate">8/28/2017 10:55:00 AM</label>

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                            <label>A stranded motorist escapes floodwaters on Interstate 225 after Hurricane Harvey inundated the Texas Gulf coast with rain./ REUTERS </label>

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            <p><p>Insured losses resulting from Tropical Storm Harvey’s winds and storm surge in Texas will range from $1.2 billion to $2.3 billion, not including the impact of ongoing rain and potentially record flooding from Harvey’s unprecedented precipitation, according to catastrophe modeling firm AIR Worldwide, a Verisk Analytics Inc. business.</p>

<p>In a statement Monday afternoon, AIR noted that according to the National Hurricane Center, winds at landfall, when Harvey hit the Texas Gulf Coast as a Category 4 hurricane, were approximately 130 mph, as hurricane-force winds extended 40 miles from the center and tropical storm-force extended 140 miles from the center. The storm surge was estimated at six to 12 feet.</p>

<p>Harvey weakened to a Category 1 by 5 a.m. CDT Saturday morning and was downgraded to a tropical storm with sustained winds of 70 mph at 1 p.m. later that day, according to the Center.</p>

<p>“With a lack of large-scale atmospheric steering, Harvey's motion was stalled resulting in extremely heavy and continuous tropical rainfall in a concentrated area,” Eric Uhlhorn, principal scientist at AIR Worldwide, said in the statement.</p>

<p>By Monday morning, 24.44 inches of rain had fallen at Bush International Airport in Houston, where a new daily rainfall record was broken with 16.07 inches falling in one day, according to AIR. An additional 10–20 inches of rain are expected between now and Friday.</p>

<p>“As a result of the unprecedented rainfall that has fallen in Houston and its surrounding areas, 66 of the 120 river gauging stations of the National Weather Service in Houston and Galveston are currently at various stages of flooding,” Mr. Uhlhorn said in the statement. “By September 2, 74 of these gauging stations are expected to have flooded, about 50 of which will experience major flood stages.”  Many of the rivers in the area will crest with new record-setting flood levels, he added</p>

<p>AIR suggested the storm may have political ramifications.</p>

<p>Harvey may push the National Flood Insurance Program up against its borrowing limit of $30 billion and could lead lawmakers to reform the program, which is due to be reauthorized at the end of September, according to AIR.</p>

<p>This comes on the heels of an <a href="http://www.businessinsurance.com/article/20170816/NEWS06/912315211/Trump-signs-executive-order-revoking-federal-flood-risk-management-standard">executive order from the White House</a> revoking the establishment of a federal flood risk management standard.</p>

<p>AIR’s figures include wind and storm surge damage within the extent of Harvey’s tropical storm-force and hurricane-force wind field, including onshore residential, commercial and industrial properties and their contents, automobiles and time-element coverage, such as additional living expenses for residential properties and business interruption for commercial properties, but not business interruption losses resulting from the closure of oil refineries in the region.</p>

<p>“Please note that total economic losses are expected to be higher than industry insurable loss estimates,” AIR said.</p>

<p>Primary insurers will get hit hardest by Harvey, analysts said.</p>

<p>“Primary insurers will face the largest effect from Harvey, with regionally focused carriers most vulnerable given their geographic concentrations,” Moody’s Investor Services Inc. said in a Sector Comment on Monday morning.</p>

<p>Reinsurers with U.S Southeast exposure will also be hit but should be able to absorb the losses, the New York-based rating agency said.</p>

<p>“The Southeast is a peak catastrophe zone in the U.S. for reinsurers, and those with exposure to Texas are at risk of incurring meaningful losses, although we expect those losses to be manageable relative to earnings,” Moody’s said in its analysis.</p>

<p>According to Moody’s, the top 10 commercial insurers in Texas are: CNA Financial Corp., with $523 million of direct written premium in 2016; Liberty Mutual Insurance Co., with $405 million in premium; American International Group Inc. with $330 million; Travelers Cos. Inc. with $323 million; Germania Mutual Insurance with $289 million; Chubb Ltd. with $268 million; Farmers Insurance Group of Companies with $231 million; Zurich Insurance Group Ltd., written by Zurich American Insurance Co., with $229 million); Nationwide Mutual Insurance Co. with $207 million; and Assurant Inc. with $192 million.</p>

<p>Moody’s added that the Texas Windstorm Insurance Association, which is also positioned to absorb losses beside insurers, provided about $67.6 billion of coverage as of June 30, with total payment capacity is about $4.9 billion.</p>

<p>The National Hurricane Center’s 1 p.m. Monday advisory said, “Harvey is expected to produce additional rainfall accumulations of 15 to 25 inches through Friday over the upper Texas coast and into southwestern Louisiana,” with isolated storm totals reaching as high as 50 inches over the upper Texas coast, including the Houston/Galveston metropolitan area. </p>

<p>“These rains are currently producing catastrophic and life-threatening flooding over large portions of southeastern Texas,” said the center, warning against travel.</p>

<p>Rain accumulations of five to 15 inches are expected farther south into the middle Texas coast, farther west toward the Texas Hill Country, and farther east across south-central Louisiana, the center said.</p>

<p>The center said it is too early to begin calculating the cost of the storm.</p>

<p>“It will take some time to determine the magnitude of insured damages and the degree to which the hurricane affects various industry participants,” the center said.</p>

<p>Analyst Keefe, Bruyette, & Woods Inc. in a note Monday morning also said it is early in the process but that damages may exceed initial projections, which were in “low nine figures.”</p>

<p>“Although it's still too early for credible estimates, we expect insured losses to exceed initial low-single-digit billion dollar estimates that emerged on Friday, with flooding likely driving significant personal and commercial auto and commercial property losses,” KBW said in its note.</p>

<p>AIR Worldwide reported that in Rockport, Texas, four miles west of the landfall location, extensive building damage has been reported, including a large part of a high school caving in, a collapsed roof at a senior center and structural damage to the courthouse and other downtown buildings.</p>

<p>The company added, however, that “it is still in the very early aftermath of landfall, and reconnaissance has only just begun.”</p>

<p>Aon Benfield’s Impact Forecasting said the amount of rain in Houston has already equaled that from tropical storm Allison in 2001, previously considered the worst flood event in Houston’s recorded history, with an estimated $11.9 billion in economic damage in current dollars, less than half of which — some $5.0 billion current dollars — was covered by insurance.</p>

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