Last year we watched as Hurricane Maria became one of the costliest hurricanes in history, totaling an estimated $90 billion in damages and leaving millions of people without power and necessities for an unprecedented amount of time. Of the areas affected by Maria, Puerto Rico endured the worst of the storm’s damage and casualties. The island has made considerable progress in recovery, but our research suggests that a long road is still ahead.
Aftermath: One Year Later
Despite the amount of time passed since Hurricane Maria, some parts of the island have recovered faster than others. The island’s power grid has recovered 95 percent of its production capacity, but according to USA Today, Puerto Rico’s larger cities—namely, Ponce and San Juan—are still seeing a much faster recovery than coastal towns such as Humacao and Punta Santiago. The uneven recovery across the island stems from the larger cities receiving international spotlight and thereby receiving the most federal aid.
The island’s uneven recovery also highlights the reality of those on the outskirts of adequate federal assistance. There are tens of thousands of people still living underneath FEMA-provided tarps meant to substitute roofs torn off homes during the storm, according to a Rolling Stone report from September. The report also reveals that much of Puerto Rico currently features bridges on the verge of collapse, weakened infrastructures threatening to crumble, and citizens suffering from post-traumatic effects of environmental chaos.
Due to the domestic insurance regulations of the Office of the Commissioner of Insurance of Puerto Rico (OCI), only a select few agencies are allowed to do business on the island. The biggest agency active in Puerto Rico is AFLAC, while the remaining agencies operate on a smaller, mom-and-pop-type scale. Because most international insurers aren’t allowed to assume Puerto Rico risk (with the exception of surplus lines and reinsurance), many of the island’s properties lack viable insurance options.
As you can imagine, the lack of available insurance for homes is inhibiting the island’s financial recovery. Unlike the mainland U.S., uninsured homes in Puerto Rico are fairly common: Of the three million people that inhabit Puerto Rico, there are approximately 500,000 with active mortgages, and only about half of those homes are insured. The lack of home insurance can be partially attributed to the fact that many older homes in the area were passed down within family generations, making them less likely to be insured by the owner.
Insurance Claims Statistics
Puerto Rico may have not been prepared for Hurricane Maria from an insurance standpoint, but valuable claims data was recovered nonetheless. Claims adjusters from the mainland U.S. were allowed to assist in this special circumstance, but challenges such as policies being written as Dwelling Policies instead of Homeowners Policies have created a grey area for coverage of water damage caused by high winds. Also, the average claim amount for Maria is now 10 times what it was in August, likely due to claims needing to be re-inspected or reopened and subsequently increasing supplemental payments.
The devastation of Puerto Rico by Hurricane Maria will remain a valuable lesson for insurance carriers and claims adjusters around the world, especially those servicing areas at risk of extreme winds and flooding. DIMONT has seen its share of messy claims processes post-natural disaster, which is why our team is always ready to provide practical, technology-led guidance for lenders and insurers nationwide.