Hurricane Florence weakens but insurance firms still braced for billion dollar losses

 
Callum Keown
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Hurricane Florence Likely To Strike East Coast With Damaging Effect
Hurricane Florence could hit the US east coast later today. Picture: NASA (Source: Getty)

Hurricane Florence has been downgraded but the “life-threatening” storm set to hit the US east coast later today could cost the insurance industry up to $20bn .

More than a million people, as well as businesses have begun evacuation from the coastline as the storm prepares to devastate North and South Carolina.

At least 800 flights have already been cancelled across the weekend in preparation of a three-day barrage.

Catastrophe risk modelling company, Risk Management Solutions (RMS), said the storm could cause covered losses of $15-20bn based on historical hurricanes and the present day make up of property and businesses along the coastline.

Read more: Oil prices break $80 per barrel mark

The storm has been downgraded to category 2, but the US National Hurricane Centre said that only denoted wind speed.

RMS also warned that estimate didn't include the flooding potential of the impending storm.

The most devastating storm to hit the area in recent memory – Hurricane Hugo in 1989 – caused $20.5bn when translated into present day values.

JPMorgan's property and casualty insurance team estimated insurers could lose $8b-20bn, while some analysts said the figure could exceed $20bn.

The insurance sector on the S&P 500 dropped 0.5 per cent yesterday and has dropped by around 1.5 per cent since Monday.

Read more: US insurance sector could take $20bn in losses from Hurricane Florence

Business claims could also worsen the picture for insurance firms, with employers already closing down factories as part of a mandatory evacuation.

Daimler has suspended operations at its Mercedes-Benz van factory in Charleston, less than a week after it opened.

The company has signed a contract with Amazon to produce 20,000 vans for its delivery service.

Boeing will closed its North Charleston plant and pause production of its 787 Dreamliner plane as did Volvo.

Oil prices dropped below yesterday's $80 per barrel highs following the downgrading of the storm.