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Derecho in the Midwest seen driving property and flood claims
HUB International said prolonged power outages are likely to strain business interruption coverage, with the storm also bringing straight-line winds up to 99 mph at Chicago’s Gary airport.
A derecho that swept across parts of the Midwest this week is expected to generate property, flood, and business interruption claims, according to Insurance Business. HUB International’s North American property practice leader said insurers will largely rely on the amount of physical damage and how property programs treat severe convective storm, flood, and time-element exposures.
HUB International executive Blake J. Giannisis said the event included significant power outages and widespread flooding, which can translate into both direct damage and loss of income for affected policyholders. He also noted that a derecho is generally handled under severe convective storm provisions rather than the named windstorm framework used for hurricanes, which can affect which policy limits and deductibles apply.
The storm moved on August 11, producing widespread straight-line winds of about 70 mph to locally over 100 mph in parts of northeastern Illinois and northwestern Indiana, the National Weather Service said. Reuters, citing PowerOutage.us, reported that more than 360,000 homes and businesses were still without power on Friday, including over 215,000 in Indiana, while NIPSCO targeted full restoration for affected customers by August 21.
Giannisis added that the current soft property insurance market may have reduced the likelihood of restrictive terms, though he said sublimits and deductibles tied to severe convective storm coverage, including SCS sublimits, will likely be a near-term focus. Flood exclusions or larger flood deductibles could limit recovery, and flood-related issues like water seepage, intrusion, and mold can further complicate claims, the article said.