Insured Ida losses converge around $18bn but some warn could rise higher

Initial insured loss estimates for Hurricane Ida are converging around the $18bn mark but many are stressing post-event loss amplification could drive the cost higher. After Ida hit Louisiana over the weekend, the early consensus was for insurance losses in the $15bn to $25bn range. But experts stressed it could take a while to get a more accurate picture. Moody’s cautioned on Monday that it could take “months” to assess the magnitude of Ida’s impact on the P&C sector. Since then, modelling firms have begun to give more precise initial estimates. Karen Clark & Company (KCC) has put losses at $18bn, with $40m in the Caribbean and the rest from wind and storm surge in the US. The estimate includes privately insured damage to residential, commercial and industrial properties and automobiles. It does not include boats, offshore properties or National Flood Insurance Program losses. Then CoreLogic, a California-based provider of property information to underwriters, placed insured flood and wind losses from Hurricane Ida between $14bn and $21bn. The firm estimates that insured flood losses for residential and commercial properties in Louisiana, Mississippi and Alabama will be between $6bn and $9bn. This includes both storm surge and inland flooding. Insured wind losses are estimated at $8bn to $12bn. But most industry sources agree that assessing Ida’s total cost will take a while yet. Post-event loss amplification could add to these initial modelled estimates, with Covid-19 creating loss-adjusting problems and potentially affecting rebuild costs. There are also the issues of rising inflation, material shortages leading to price increases and rising labour costs. However, ratings agencies expect the hurricane to be an earnings rather than capital event for the insurance industry. “While losses will take some time to reconcile, there are indications that this will be an earnings and not capital event for the industry,” Fitch said. The ratings agency added that although Hurricane Ida is expected to generate “significant economic and insured losses in Louisiana”, the storm is unlikely to trigger ratings downgrades of individual P&C insurers or reinsurers. Even if the insured loss figure for Ida rises, they will be well below the record $65bn figure for Hurricane Katrina in 2005. But Ida, which made landfall in Louisiana as a Category 4 hurricane on Sunday, will likely surpass winter storm Uri as the largest industry event in 2021. Uri, which hit swathes of the US in February, caused about $15bn in insured losses. Hurricane Ida made landfall in Louisiana on Sunday, less than 40 miles away from where Hurricane Katrina did the same in 2005, but the two storms were substantially different, said Tom Larsen, principal, insurance solutions, at CoreLogic. “While only 40%-50% of the flood damages from Hurricane Ida appear to be covered by insurance, this is actually an improvement from the uninsured flood damages we saw from Hurricanes Harvey and Katrina,” he said. More than 90% of the Ida losses are estimated to be in Louisiana, primarily in the nine parishes in the New Orleans-Metairie-Hammond metropolitan area, as well as in Ascension, Lafourche, Livingston and Terrebonne parishes immediately to the west, CoreLogic said. Hurricane Ida made two landfalls, one near La Columba in Cuba with maximum sustained winds of 80mph on 27 August, and then near Port Fourchon in Louisiana with maximum sustained winds of 150mph on 29 August. KCC said the impacts in Cuba and the Cayman Islands have been limited to non-structural damage, downed trees and power outages. It added that Louisiana’s coastal areas have experienced significant structural damage to commercial and residential buildings from damaging winds, and low-level wind damage extends further inland into southern Mississippi. In a note on Tuesday, Piper Sandler Research shed some light on how losses might be distributed across the insurance industry’s main players, based on their respective reinsurance positions. Chubb, for example, has a $1bn retention in the US but also sells reinsurance for which losses are hard to predict, Piper Sandler said. AIG has a complicated reinsurance programme, according to Piper Sandler. The firm has a $1.275bn per occurrence for personal lines, with attachment points varying between $50m and $150m. It has a per occurrence of $1bn in excess of $500m for southwest US and Gulf states. AIG also sells reinsurance through its operations including Validus Re, which has a $475m limit in excess of $300m. Travelers buys relatively little reinsurance. It has coverage for 75% of losses in excess of $3bn, up to $5bn. The top commercial property insurers in Louisiana based on direct premiums written are CNA Financial ($133m), Liberty Mutual ($87m) and Zurich American Insurance Co, part of Zurich Group ($82m), according to Moody’s data. AIG ($81m) and Chubb ($72m) round out the top five. The top ten insurers in Louisiana write a total of $744m in direct premiums, and the industry total premiums for the state are $1.735bn, according to Moody’s.

Insured Ida losses converge around $18bn but some warn could rise higher

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