“What we saw laid before us was horrifying. Everything was destroyed: bridges, roads, electricity pylons – not to mention the buildings”, reported Joachim Pawellek. “In the past 100 years, there had been just one storm of the same magnitude – the Labor Day Hurricane that hit Miami in 1935”, storm modeller Thomas Hofherr added. Dorian was a category 5 storm, the strongest that exists. “Considering the highest category begins at 137 knots (around 254 km/h), Dorian – with winds of up to 160 knots (almost 300 km/h) – was in a whole new league”, Hofherr continued.
“I was surprised to see that the levels of destruction varied so much between the affected islands of Abaco and Grand Bahama”, said Roman Bügler. The fact that the wind speed was so high over Abaco was the main reason the island came off so badly. Over 70% of the island was devastated. “Once the hurricane had swept over the island and had moved on to ravage Grand Bahama, it slowed down significantly and basically hung over that island for two days”, explained Hofherr. “It was a monster that simply wouldn’t budge”, said Pawellek. “That is why the flood damage was so significant.
Clients appreciated our visit
The main objective of the Munich Re experts’ trip was to exchange experiences with key clients. “The timing was perfect”, the four agreed: “We were the first reinsurers on the ground there”, Pawellek explained. “Our clients really appreciated that.” Pawellek added that a further objective was to carry out a comparison between Dorian and 2016’s Hurricane Matthew. “Publicly accessible sources can provide some information, but they don't allow you to really get a feel for the extent of the damage”, Pawellek explained. Together with a local loss adjuster, the colleagues inspected the areas, analysed the portfolios of all the cedants and many classes of business, and assessed individual losses – especially those pertaining to residential properties and industrial risks, such as the airport and a brewery on Grand Bahama.
The different levels of damage suffered by the individual buildings were most revealing for the modeller. It is frequently the case with storms that there are huge differences in just a tiny area: “One house was completely destroyed, for example, while another building just 50 or 100 metres away suffered only minor damage”, was how Hofherr described the situation. There were even huge discrepancies between terraced houses of the same quality of construction: “The walls of one mid-terrace house had been blown out entirely, for example, while the house next door was intact, with just some damage to the roof.”
Why are there such discrepancies?
Essentially, two factors are responsible for such differences: firstly, the intensity. “Large storm systems can contain smaller microsystems with higher wind speeds”, Pawellek explained. Another key factor is the construction quality. “That includes anything from joist reinforcements to the length of the nails used.” Even small preventative measures can enable a building to withstand 50–60 km/h stronger winds. “This knowledge can be used to more accurately reflect individual risk aspects in models”, Hofherr stressed. At the Insurance , a research centre with test stations in which Munich Re cooperates, such preventative measures are investigated and recommendations drawn up.
“When you talk to the primary insurers and loss adjusters, you can sense just how much the work affects them”, Roman Bügler reported. While those affected need money quickly, the losses have to be assessed precisely. But Dorian brought with it human suffering of an entirely new dimension: “In Abaco, a shantytown was razed to the ground by the storm. To this day, there are no accurate figures of how many people died there”, Hofherr lamented. Loss adjusters speak of many thousands.
Dialogue with cedants helpful
“As a reinsurer, we could help even more quickly – first and foremost financially, of course. While Munich Re often transferred the money rapidly to the insurers, getting it to the policyholders was much more complicated. Firstly, it is common to use cheques for payment in the Bahamas – and to hand these over in person. Often, the insurers were simply unable to contact the insureds – for example if a mobile phone was separated from its owner in the storm: “We approached cedants to discuss how to simplify processes and speed up payments.” Of course one has to check things very carefully, “but we also need feedback to find out what led to delays”, said Pawellek. “The cedants really appreciated the dialogue, and our client relationships improved as a result.”
Another aspect bothered the storm modeller: “When you see how sparsely populated the two islands are compared to the Florida coastline from Miami to Jacksonville, you don't even want to imagine the damage that a hurricane could wreak along Florida's east coast.” This is exactly what people feared during Hurricane Irma in 2017. Initial predictions for this year's hurricane season certainly give no reason for optimism: scientists agree that this year could see above-average storm activity.