Speaking to The Insurer TV following the modelling firm’s estimate of a $53bn to $74bn private market loss from the event, Waters highlighted how the company had addressed the likely impacts of litigation and assignment of benefits (AOB) on the ultimate insured loss from Ian.

“We know there has been legislation passed to help curb the impacts of AOB and to some extent other aspects of social inflation,” he said.

“But there is uncertainty around how effective that litigation is going to be. We think it could still come through and impact the average cost of a claim, and we wanted to make sure we acknowledged that this could be an influencing factor.”

Waters highlighted that the modelling firm carried out claims assessments from the two most recent major hurricanes to impact the state – 2018’s Michael and 2017’s Irma – to inform its estimate for Ian.

“We were able to quantify some of the impacts of social inflation, AOB and litigation, and that helped inform where we go to with Ian. We also looked into the issuance of new legislation and its effectiveness to curb those types of impacts.”

Waters said RMS was also able to do additional tests to understand the uncertainty range around the impacts of that legislation.

“In a best-case scenario, where it is super-effective, we think the social inflation component of the non-modelled source of loss could be a little bit more muted.

“But we also have to acknowledge that at the other end of the spectrum, where perhaps legislation is not as effective as might be hoped, then it subsequently forms a larger part of the loss equation.”

Waters also highlighted the potential impact of post-loss amplification on the cost of the event.

“We do think that the claim settlement process could take some time, the overall volume of claims could be quite high,” he said.

“Then of course there is also the cost of construction materials, labour shortages, supply chain disruption – all of these inform the post-loss amplification component, and this is important when considering the overall number.”

RMS’ official guidance for Ian includes a best estimate of $67bn for the private market loss with an additional $10bn of National Flood Insurance Program (NFIP) losses.

The private market loss includes $46bn to $67bn of wind losses, as well as $6bn+ of private market storm surge losses and $1bn+ of inland flood losses (in addition to those incurred by the NFIP).

As noted above, the estimate includes the potential impact of non-modelled sources of loss, such as AOB and litigation, as well as the impacts of post-event loss amplification and inflation.

Alongside property damage and business interruption, the RMS estimate also includes auto and watercraft losses, as well as those incurred for other specialty lines.