Analysts have said that losses from Hurricane Ida could shift more to reinsurance as the heavy catastrophe load in the first half of 2021 saw primary insurers erode a significant amount of their catastrophe budgets. However, analysts don’t expect the storm to have a meaningful impact on rates ahead of the January renewals.
Hurricane Ida hit Louisiana on Sunday as a Category 4 hurricane with 150 mph sustained winds.
Impacts have been significant to parts of southern Louisiana, with barrier islands and key energy facility Port Fourchon receiving a direct hit.
Early estimates based on the storm’s landfall and path suggested an insurance and reinsurance industry loss in the double-digit billions.
But analysts at Morgan Stanley have said that the faster than normal erosion of aggregate catastrophe covers through H1 2021, driven in part by the impacts of winter storm Uri in the U.S., means that industry losses from Ida “would fall more on reinsurers than on primary carriers.”
As we wrote previously, insured catastrophe losses are believed to be running 41% above the long-term average, leading analysts to warn that cat budgets will likely be exceeded in 2021.
Add to this the impacts of the recent flooding in parts of Europe for the international players, and now the costs of Hurricane Ida, which is expected to be a double-digit billion loss at or up to roughly $25 billion, and it’s easy to see how these budgets could be eroded.
This means that the financial burden from Hurricane Ida and any future hurricanes, or other catastrophe losses that occur later this year are likely to fall more to reinsurers.
But while the damage caused by Ida is clearly significant, analysts don’t feel that a loss of this magnitude alone is enough to move re/insurance rates.
“At this point (recognizing that this storm and Hurricane Season 2021 are still ongoing), we don’t expect a meaningful change to the trajectory of decelerating property and property catastrophe insurance and reinsurance rate increases,” said analysts at KBW.
So while the deceleration of reinsurance rate improvements might well persist, it doesn’t necessarily mean that price declines will occur anytime soon either.