Hurricane Alex to cost $200m

Catastrophe risk modeling firm AIR Worldwide (AIR) estimates that insurable losses from Hurricane Alex are not expected to exceed $200m because insurance penetration in Mexico is relatively low.

This loss estimate covers possible wind and flood damage to onshore properties in Mexico and is based on the available meteorological parameters and the forecast track for Hurricane Alex since it made landfall in northeast Mexico Wednesday night.

Comaprisons

“Hurricane Dolly in 2008, which also reached Category 2 intensity was the most recent hurricane to make landfall close to Hurricane Alex’s path,” said Dr Tim Doggett, principal scientist at AIR Worldwide.

“The last hurricane to form in the Atlantic basin in the month of June was Hurricane Allison, 15 years ago, in 1995. That year saw 19 named storms, 11 hurricanes, and five major hurricanes—a season very similar to that predicted for 2010. Alex also has been the strongest hurricane to form in the Atlantic basin in June since 1966.”

Doggett said, “While Alex made landfall as a more intense storm than was expected, because of the relatively low population in the area and the small size of Alex’s radius of maximum winds, Alex’s overall impact in terms of wind damage will be less than anticipated.”

The NHC expects Alex to weaken to a tropical depression later today and then dissipate within the next 24 to 36 hours. However, heavy rain is expected to continue.

Insured properties

“Insured residential properties in Mexico overwhelmingly are of confined masonry construction, while insured commercial properties are dominated by confined masonry and reinforced masonry construction,” said Doggett.

“Both construction types should fare well against Alex’s wind speeds. Additionally, the area of Alex’s landfall and inland track is sparsely populated. Structural damage, therefore, is expected to be minimal.

“In total, given that insurance penetration in Mexico is relatively low, the resulting insured losses are not expected to be significant. The full extent and possible effects of expected flooding, however, remain uncertain.”