In an update on hurricane Nicholas, the latest Gulf of Mexico tropical storm that intensified right up to making landfall and struck Texas yesterday, BMS Senior Meteorologist Andrew Siffert explained that Nicholas may cause an insured loss similar to 2019’s tropical storm Imelda, at around $700 million.
Hurricane Nicholas made landfall near Matagorda, Texas as a minimal Category 1 hurricane yesterday.
This region of the Texas coastline is fairly rural, Siffert, who works at the insurance and reinsurance broking group BMS, noted, but still more than half a million power outages have been reported around the Galveston and Houston areas of the state.
Siffert looked at similar storms that also made landfall around the Matagorda area and came up with last year’s tropical storm Beta that only drove a roughly $100 million insurance market loss and 2019’s tropical storm Imelda that resulted in a $700 million industry loss.
Siffert believes that the industry loss to insurance markets from hurricane Nicholas will be close to that of Imelda, but also notes “the main area of uncertainty being the extent of flooding in the Houston area since the flood take-up rate has grown over the years for these coastal counties.”
Rainfall is expected to be the main factor in losses from hurricane Nicholas, suggesting that no matter how high the insurance market impact rises there is unlikely to be too much impact on any reinsurance arrangements, other than perhaps quota shares.
A large swath of 6 to 12 inches of rainfall is expected, with the NHC having warned of isolated storm totals as high as 20 inches.
Galveston is reported to have experienced 16 inches of rainfall, but Houston only 6 inches, which is far from the 60 inch storm totals experienced during hurricane Harvey in 2017.
A further 1 to 3 inches of rain per hour is expected as Nicholas makes its way into Louisiana.
Siffert explains that this rainfall is expected to reach to the New Orleans region and so may “compound the insured losses that have already occurred in this area,” after recent hurricane Ida.
Finally, a particularly interesting fact that shows just how active the tropics have been over the last couple of years is that, hurricane Nicholas is the 19th named storm to make landfall in the United States since May 2020.
Siffert notes that the average is actually around three named storm landfalls per year, meaning that the last 19 months is “clearly a drastic change from the quiet period between 2006 and 2016.”