Despite losses, Ida’s not a capital event, says Fitch

Hurricane Ida will bring significant insured losses for Louisiana insurers and reinsurers but is likely to be an “earnings and not capital event” for the industry, according to Fitch Ratings. Property and casualty insurers with the largest exposure in the state have generally seen their capital expand over the last year, leaving the industry well place to absorb a significant catastrophe loss,  it added.

Ida made landfall on Sunday as a Category 4 hurricane, among the strongest ever to hit the state. Winds, with some of the strongest near New Orleans, along with storm surge and flooding have caused significant damage and left one million without power – some  potentially for weeks. Louisiana governor John Bel Edwards has told those who fled their homes not to return until officials give the go-ahead.

According to Fitch, early estimates indicate a potential industry loss of $15 billion to $25bn, likely to surpass winter storm Uri ($15 billion) as the costliest event in 2021 and well above Hurricane Laura’s $10 billion insured catastrophe losses in 2020. The storm could also trigger aggregate covers given above average accumulation of insured losses so far in 2021, warned Fitch.

Fitch also noted that the ongoing pandemic may compound logistical challenges of assessing property damage and “lead to modestly elevated levels of loss adjustment expenses”. Supply chain shortages of building materials and higher contract labour costs could also push up insured property claims, it added, echoing warnings  from others.

Nevertheless, the cost will fall well below the record $65bn of insured losses in 2005 from Hurricane Katrina, which had a much larger footprint. The state also benefited from the post-Katrina flood defences that protected New Orleans city.

Ida, now a tropical storm, continues to move inland. The National Hurricane Centre has warned of potential flooding to parts of Mississippi, Alabama and Florida.