AM Best: Ida may help harden reinsurance rates
Hurricane Ida will be more of an earnings hit as opposed to a capital event for the insurance industry, A.M. Best posits in its latest commentary.
The rating agency said that because a number of Louisiana writers are regional players with lower levels of capital, a sizeable amount of losses is likely to be ceded to reinsurers.
But reinsurers should be able to absorb the magnitude of losses without impacting their capital positions.
Hurricane Ida will add to uncertainty about the growing frequency of weather events, the agency said, and provide momentum to reinsurance pricing.
The report said: “Hurricane Ida could pressure reinsurers, whose natural catastrophe budgets had already been increased following the Texas freeze, as they must contend with potentially high claims activity during the rest of 2021 Atlantic hurricane season.”
Hurricane Ida made landfall as a strong Category 4 storm on Sunday along the southeastern coast of Louisiana, near Port Fourchon, similar to Hurricane Laura’s path last year, which resulted in about $5 billion in insured losses.
Ida was actually further east with more impact on New Orleans, which will likely result in a larger share of losses for the commercial lines.
Property damage and business interruption losses may contribute more to overall losses than Hurricane Laura did, which had greater impact on personal lines.
Louisiana insurers faced heightened losses, with more than 300,000 claims attributable to Hurricanes Laura, Delta, and Zeta last year. and underwriting losses may continue this year.
Demand surge is likely to increase re(insured) losses, especially with the 5.4 per cent rise in the US consumer price index compared to July 2020.
Ida’s storm surge on Sunday -16 years to the day after the devastating Hurricane Katrina – was met by the infrastructure improvements dictated by Katrina and that should help curtail losses – particularly, National Flood Insurance Program losses, as the new levee systems have thus far performed as expected.