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Hurricane Ida insured losses could reach $25 billion

Damage caused by Category 4 Hurricane Ida is expected to result in an insured loss of between $15 billion and $25 billion, Zurich-based Twelve Capital AG has estimated.

The company is an independent investment manager specialising in insurance investments for institutional clients as well as a provider of capital to the insurance and reinsurance industry.

Ida hit Louisiana at midday on Sunday, packing winds of 150 miles per hour, just seven miles per hour short of the wind strength that would qualify it as a Category 5 storm on the Saffir-Simpson hurricane wind scale.

The storm’s winds tied it for the fifth-strongest hurricane to ever hit the mainland US.

It knocked out power to the city of New Orleans, blew roofs off buildings, and temporarily reversed the flow of the Mississippi River.

The storm’s top winds grew by 45 miles per hour in five hours as the storm moved through the warm waters of the northern Gulf of Mexico.

Twelve Capital, which also has offices in London and Munich, said: “Over the weekend, Twelve Capital has received event modeling information from various modeling vendors.

“These first early indications point towards an insured loss of around USD 15-25bn for the insurance industry.”

It added: “As the event is still ongoing with flooding remaining a meaningful threat for the next couple of days, some caution with regards to these numbers is advised. Yet, should this turn out to be a correct estimate for this event, Twelve Capital does not expect any meaningful impacts to its ILS positions.

“Also, it should be noted that even for the vast majority of aggregate Cat Bonds, there will still be between 70-80 per cent of their buffer (attachment) left for the remainder of the 2021 hurricane season, which is almost half-way over, before these bonds would even start taking losses.

“As such, Twelve also does not anticipate any significant mark-to-market reactions, but remain vigilant as these assumptions are still subject to change.”

Twelve Capital added: “In addition to the damage from strong winds, Ida has been causing damage from storm surge and inland flooding, which will also test the new flood defences (levees) that were put into place after (Hurricane) Katrina.

“Thus far, indications have them as working, unlike in Katrina where a vast majority of the damage was caused by flooding due to the levees failing. As the storm stayed slightly west of New Orleans and travelled through lower density areas, this reduced the expected level of industry loss.”

Ida struck on the 16th anniversary of Category 3 Katrina, which hammered Louisiana and Mississippi in 2005.

Ida weakened to a tropical storm Monday as it moved its way inland.

One death has been reported.

Flooded streets and homes are shown in the Spring Meadow subdivision in LaPlace, La., after Hurricane Ida moved through Monday. Hard-hit LaPlace is squeezed between the Mississippi River and Lake Pontchartrain. (AP Photo/Steve Helber)

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Published August 31, 2021 at 8:03 am (Updated September 01, 2021 at 8:07 am)

Hurricane Ida insured losses could reach $25 billion

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