Home / Daily / Hurricane Ida losses heading for $20-34 billion
2 September 2021
Hurricane Ida insured losses could reach $US15-25 billion ($20-34 billion) based on early estimates, with the storm likely to be a major event for the reinsurance sector, S&P Global Ratings says.
Primary property and casualty insurers are well positioned to absorb impacts after entering the year with strong capital positions, while many have boosted use of reinsurance since Hurricane Katrina hit the same area 16 years ago to the day, a report from the company says.
“We think global reinsurers will be significantly exposed to the damage caused by Ida, especially hitting the sector’s catastrophe budget and earnings,” S&P says. “But we expect the potential losses from this event on a stand-alone basis will likely result in an earnings event rather than a capital event.”
Ida crossed the Louisiana coastline on August 29 as one of the strongest storms on record to hit the US mainland, maintaining hurricane strength as it moved inland.
But S&P Global Ratings says insured losses from Ida are likely to be well below the $US41 billion ($56 billion) of onshore privately insured losses experienced after Katrina, given upgraded levee and pumping station defences for New Orleans worked as intended.
Katrina’s hurricane force winds, although less powerful, also affected a wider area, while Ida generated a smaller storm surge and made initial landfall in a less-densely populated area with a more favourable topography.
The global insurance sector has this year experienced heavy losses from winter storm Uri in Texas, hail and wildfires, as well as European flooding in June and July.
S&P says Ida is the first significant Atlantic hurricane in terms of insured losses for the season, which extends until November. Forecasters say this year is expected to be more active than normal.
Fitch Ratings says Hurricane Ida is expected to generate significant economic and insured losses in Louisiana, but is unlikely to trigger ratings downgrades of individual insurers or reinsurers.
The hurricane has coincided with a coronavirus resurgence in Louisiana that has increased hospitalised patient numbers across the state compared with earlier in the year.
“The ongoing pandemic may compound the normal logistical challenges of assessing damage to property following a catastrophe event and lead to modestly elevated levels of loss adjustment expenses,” Fitch says.
“The severity of insured property claims may face adverse impact from supply chain shortages of building materials and higher contract labour costs.”
The remnants of Ida have continued to cause heavy rainfall and flooding as the storm system has moved into the US northeast.