Looks Like A Tough Hurricane Season

[SafetyinNumbers]

25 minutes ago, ValueMaven said:

Fairfax has been selling off - yet most of the manager reinsurance companies have bounced back a bit over the last day or two.  Any reason why?  

Fairfax has fickle marginal shareholders

[Thrifty3000]

6 hours ago, A_Hamilton said:

That's not how it works. FFH would be taking excess of loss on homeowners (they've gotten out of quota share / 1st dollar of loss there). Thus, if an insurer wants to lay off any losses over say $25 million, up to $200 million, FFH might have reinsured exposure with a maximum loss of $175 million. It is more complicated than this as usually there are many program participants, but this is the approximate way to think about it.

 

Also, storm hitting Tampa (or any metro area) directly implies greater losses for FFH than not as they have a lot of commercial business where they would also take loss (for instance, business interruption). 

 

Ok, so I do feel like I get what you’re saying about reinsurance and retrocession policies (aka reinsuring reinsurers).

 

But, in my tiny little meat computer I have to oversimplify by making it all about replacing or repairing “structure/asset equivalents”.

 

For example, if a boat insurer insures 10,000 boats, but pays FFH to accept risk for 2,000 boats in the event more than 20% of their insured 10,000 boats have been damaged, then I have to think about how many boats FFH is on the hook for. 
 

Yes, it’s vast oversimplification, but my monkey brain would stroke out if I didn’t oversimplify.

 

By oversimplifying I’m basically telling myself that if a fictional super-hurricane wiped out every single home in Florida that FFH would be on the hook for roughly 90,000 residential policy equivalents for homes with values averaging $400,000.

 

I know I’m wrong but I’m just trying broadly frame this risk, while also eliciting excellent feedback from more evolved monkeys who also contribute to this forum.

 

(After all this typing I’m really starting to crave a banana.)

Edited October 9 by Thrifty3000

[Parsad]

7 hours ago, Thrifty3000 said:

If Florida has 9 million homes and Fairfax insures approximately 1% of them then I'm going to assume FFH is insuring maybe 90,000 homes in the state.

 

FFH just needs to be sure they're spreadin' them suckers out. Piece of cake. Haha

 

This thing is so big that the only areas that will escape it probably are Miami and Key West.  It looks like Tampa, Sarasota, Fort Myers, Orlando are all going to take a hit.  Cheers!

[Munger_Disciple]

I also posted this on Fairfax 2024 board:
 

https://www.reuters.com/business/finance/hurricane-milton-could-cost-insurers-60-bln-raise-reinsurance-rates-rbc-says-2024-10-09/

 

No one knows what the actual damage from Milton would be but this analyst thinks insured loss in the range of $60-100B for the industry. Does this imply roughly 1.25%, or up to $1.25B hit to Fairfax (pre-tax)?

[Thrifty3000]

FWIW My neighbor moved all her valuables and her most beloved memorabilia into a storage unit about 3 years ago.
 

The timing was rather fortunate because only a couple weeks later her house happened to catch on fire, at which point she panicked and traveled on foot to her boyfriend’s house some distance away - to seek his assistance during this trying time.

 

Shortly thereafter they got in his truck and drove to her house to decide how best to handle the growing emergency. By the time they arrived some good samaritans had already called the fire department, though the call was made too late to salvage the home.

 

After 3 years of reconstruction, my neighbor and her daughters just moved back into their fully rebuilt and refurnished, dream home - courtesy of whatever insurance company she has royally suckered.
 

Long story short. Incurred losses are a fun little fictional adventure that play out over several years. Even if FFH estimates record losses from Milton, they’ll be able to charge record premiums for the next few years while they’re shelling out the money needed for post-Milton reconstruction.

Edited October 10 by Thrifty3000

[glider3834]

https://www.artemis.bm/news/hurricane-milton-losses-likely-below-a-5-cat-bond-market-impact-icosa-investments/

 

https://www.artemis.bm/news/hurricane-milton-cat-3-landfall-in-sarasota-worst-case-tampa-loss-scenarios-avoided/

[nwoodman]

50 minutes ago, glider3834 said:

https://www.artemis.bm/news/hurricane-milton-losses-likely-below-a-5-cat-bond-market-impact-icosa-investments/

 

https://www.artemis.bm/news/hurricane-milton-cat-3-landfall-in-sarasota-worst-case-tampa-loss-scenarios-avoided/

Bad, but could have been a lot worse.  Devil will be in the detail.  Just glad that this particular enviro  bomb got diffused to Cat 3 at landfall and trajectory and wind direction made for offshore where it mattered.  A bit further north….

 

[UK]

'This was not the worst-case scenario' - Florida Governor Ron DeSantis' morning briefing
43 minutes ago
15:34 EEST

Rich McKay and Stephen Farrell
Governor DeSantis said that more than 80,000 people had stayed in shelters across the state overnight. He and state officials urged Florida residents to let rescue workers check affected areas before returning to them. State officials reported at least 42 rescues, and two arrests for looting.

Florida airports remained closed on Thursday, including Tampa, Palm Beach and St Petersburg /Clearwater, with exceptions for emergency aircraft, according to the FAA.

"We will better understand the extent of the damage as the day progresses and you have people that are out there assessing damage right now, first responders have been working all through the night to help people who were in distress," DeSantis said.
"The storm was significant, but thankfully this was not the worst-case scenario. The storm did weaken before landfall."
"The Tampa airport is reporting minimal damage and should be open no later than tomorrow."
"Sea ports are awaiting Coast Guard channel surveys to reopen waterside, but as of now, our initial assessments is they will likely be able to resume operations very quickly."
"The storm surge was most acute in Sarasota, and I think it was a little bit more than Sarasota got for for Helene, but it wasn't like so much more. I think was eight to 10 feet."
"I don't think that you're looking at similar amount of damage to Ian... definitely the surge did not reach Helene levels."
"We anticipate because of the amount of water, you know, you may see flooding happen, not just now but in the subsequent days. "

 

Edited October 10 by UK

[Hoodlum]

https://dbrs.morningstar.com/research/441166
 

Key highlights include the following:
-- We expect insured losses to be in the upper half of our initial estimated range of $30 billion to $60 billion.
-- Citizens Property Insurance Corporation, Florida's public insurer of last resort and the largest residential property insurer, will maintain its financial strength, while some smaller and mid-size local insurers may face significant earnings pressure.
-- Considering the significant hurricane-related losses, reinsurance prices are likely to increase, reversing the signs of price stabilization observed during the 2024 mid-year renewal season.

[Hoodlum]

On the other side of the world, Typhoon Kong has hit Taiwan landing with the equivalent Category 3 winds.  I am not sure what if any impact this would have to reinsurance.  

[Pelagic]

This is a pretty interesting piece on hurricanes that occurred before recorded history and some of the ways scientists analyze their impacts.

 

https://www.americanscientist.org/article/uncovering-prehistoric-hurricane-activity

 

Quote

A common pattern emerging from four of our Gulf coast sites, ranging from Louisiana to the Florida panhandle, shows that catastrophic hurricanes have hit each place about 10 to 12 times during the past 3,800 years, or approximately once every 300 to 350 years. In other words, at these locations, the probability of being directly hit by a Category-4 or -5 hurricane is approximately 0.3 percent per year.

 

Quote

Hurricane activity was generally low along the Gulf coast between 5,000 and 3,800 years ago and during the most recent millennium. During these two relatively quiet periods, each site was directly hit by catastrophic hurricanes only once every 1,000 years, equivalent to a landfall probability of 0.1 percent per year. However, in sediments laid down from 3,800 to 1,000 years ago, all the Gulf coast sites contain multiple sand layers, suggesting that this was a time of relatively high hurricane activity. During this hyperactive period, each site was visited by catastrophic hurricanes as often as once every 200 years, giving a landfall probability of 0.5 percent per year.

The good news, in a way, is that we are living in an era of relative calm. But the bad news is that the climate system is capable of delivering a lot more catastrophic hurricanes than what the Gulf coast has witnessed during the past 150 years.

 

[Jaygo]

Superstorm Sara anyone? The weather nerds I follow on twitter are gloomcasting another major in the basin next week.

[backtothebeach]

On 11/12/2024 at 8:36 PM, Jaygo said:

Superstorm Sara anyone? The weather nerds I follow on twitter are gloomcasting another major in the basin next week.

Looks like it will hit Central America. Unless it goes to the furthest east that is projected (white arrow), then it would be in play for the US.

Edited November 14 by backtothebeach