Hurricane Dean Hits Mexico - 21.08.07

Hurricane Dean, which struck Mexico's Yucatan Peninsula as a category five hurricane with winds of roughly 160 mph, will cost insurers $750 million to $1.5 billion, catastrophe modelling firm Risk Management Solutions said today.  This is a smaller figure than that projected by modelling firm EQECAT which came out with a figure on Monday for insured losses of $1.5 billion to $3 billion when it looked like the hurricane would hit Cancun and Cozumel. 

Up to $300 million of insured losses are expected in Mexico, while the most costly damage occurred earlier in Jamaica.  Dean struck the south-eastern Yucatan Peninsular coast in a relatively sparsely populated area roughly 40 miles northeast of Chetumal.  Had the storm tracked 150 miles north it would have hit the tourist cities of Cancun and Cozumel, tripling the insured loss in Mexico.  "Though Jamaica has taken a large hit, the track for a category 5 storm could hardly have been better planned to minimize the damage," Dr. Claire Souch, senior director of model management at RMS, said in a statement.

It is still very early to predict the level of insured losses.  Lloyd’s will have some exposure to losses in Jamaica and in Mexico.  On its current track the hurricane is not expected to affect the energy market.  Note that since the seven hurricanes hit the USA in 2004 and 2005, rates in catastrophe areas have risen dramatically and insurers and reinsurers are now effectively accepting less risk for more premium.  It is likely that the insurers and reinsurers with the largest exposures in the Caribbean and Mexico are the Bermudan companies that write large Latin American portfolios. 

Hurricane Wilma, in 2005, was the last major hurricane to hit the Yucatan Peninsula and its Mexican insured losses were some $3 billion.  

For a useful website to track hurricanes, click here.