Residential Real Estate News
Category 5 Hurricane Otis Pounds Acapulco
Property Damage in Mexico Estimated to Hit Upwards of $15 Billion
Hurricane Otis made landfall over the southwestern coast of Mexico on Wednesday, Oct. 25 at 1:25a.m. local time (6:25 a.m. UTC). The National Hurricane Center (NHC) estimated maximum sustained wind speeds at landfall were 165 mph (270 km/h), making Otis a Category 5 hurricane. The core of Hurricane Otis made a direct landfall over the greater Acapulco, Mexico area.
CoreLogic's Jon Schneyer, Director of Catastrophe Response says that insurable (ground up) losses from wind damages in Mexico is now estimated between $10 and $15 billion.
This estimate only includes damage from wind and does not include losses from coastal or inland flooding. This loss estimate includes damage to buildings and contents only; it does not include business interruptions or the costs associated with additional living expenses. The estimate includes only residential, commercial, industrial, and agricultural structures. Government property, infrastructure, crops, and livestock are not included.
The financial impact incurred by private insurance markets is likely to be lower than the total insurable modeled loss. In markets such as Mexico, coverage is most likely limited to hotels and resorts. Property insurance penetration is much lower across the other sectors in this region, says CoreLogic.
Caught Off Guard: Unprecedented Rapid Intensification Not Captured by Forecast Models
Hurricane Otis is the strongest tropical cyclone on record to affect the Mexican state of Guerrero and the surrounding area. The October hurricane made a direct landfall on the major population center of Acapulco. The last hurricane to significantly affect Acapulco was Pauline in 1997, which brought heavy rainfall but only Category 1 hurricane-force winds. Other major hurricanes have made landfall along the Pacific Coast of Mexico, but few hurricanes directly hit a city center.
Hurricane Otis stunned meteorologists and emergency management offices alike with how it defied forecasting model expectations. Global climate and hurricane model runs from 24 hours prior to landfall indicated that Otis would not reach hurricane strength. As the system continued to develop and intensify, the models adjusted but they still noted gradual weakening before landfall.
However, warm sea surface temperatures (SSTs) near 30°C and low wind shear supplied the environmental conditions for Hurricane Otis to rapidly intensify from a Category 1 system on Tuesday morning to a major hurricane prior to landfall. In less than 24 hours, Hurricane Otis' maximum sustained wind speeds increased by 110 mph. For reference, rapid intensification is defined by a 35 mph increase in wind speeds over 24 hours.
Rapid intensification has not been uncommon this hurricane season, as several tropical cyclones have rapidly intensified in both the Atlantic and Pacific Oceans. The record-high SSTs this year may be an indicator that prime hurricane conditions will extend later into the hurricane season.
October Hurricane Makes Direct Hit on a Tourist Destination
CoreLogic says it is rare for a Category 5 hurricane to make direct landfall on a major population center like Acapulco. The catastrophic winds of Hurricane Otis (165 mph at landfall) were capable of widespread destruction across the oceanside resort city.
Acapulco is the largest city in the Mexican state of Guerrero in terms of population and economics. It is home to a high concentration of tourism-related infrastructure, including hotels and beach-side resorts, ports for luxury cruise lines, and condominiums that serve as second homes.
In 2021, the gross domestic product of Acapulco was MXN 107 billion ($54.9 billion) and represents approximately 30% of the state's total of MXN 391.6 billion ($21.5 billion). The number and concentration of resorts, hotels, commercial-residential properties (i.e., condominiums), and luxury residential properties are the principal drivers of the modeled insurable loss from Hurricane Otis.
