Hurricane Ida industry loss pegged at $32.2bn by Jefferies

Analysts at investment bank Jefferies said this morning that they estimate the insurance and reinsurance industry loss from recent hurricane Ida will be around $32.2 billion, taking the 2021 catastrophe loss year-to-date run-rate far above the average.

August’s catastrophe events, including hurricane Ida which was the largest of the year so far, have now driven catastrophe claims far above the long-term average, Jefferies analysts believe.

“Relative to the long-term average, natural catastrophe losses year-to-date are running 101% higher than the long-term average (2008-2020) and more than 87% higher than the 10-year average,” they explained.

Even excluding Hurricane Ida the analysts estimate that, “Year-to-date losses appear to be running 15% above the long-term average and 7% above the 10-year average.”

Excluding Ida the run-rate has dropped somewhat, but remains an above average catastrophe loss year.

The insurance and reinsurance industry is on-track for its most costly catastrophe year since 2017, the analysts state.

“By our calculation, natural catastrophe losses so far in 2021 are already higher than the full-year totals for the past three years (FY2018, FY2019 and FY2020),” they explained.

With still a third of the year left, it is not impossible we could see 2021’s catastrophe loss burden rising towards the record years of 2005, 2011 and 2017.

On hurricane Ida specifically, Jefferies analyst team estimate a roughly 40% economic to insured loss ratio, which they say drives their estimate for a bill of $32.2 billion.

This compares to the other estimates received so far, including, $25bn – $35bn (in Gulf region only), estimated by RMS, and $20bn – $30bn estimated by AIR Worldwide.

Including August’s losses the chart below shows that the year is now tipping towards one where flooding is now a major component of global insured losses, while the contribution from tropical cyclones has risen significantly with Ida.

Jefferies analyst team summarise the industry implications of the rising catastrophe loss burden.

Saying, “Above-average losses are putting pressure on the adequacy of corporate natural catastrophe budgets.

“Given the material losses from Hurricane Ida, we expect that reinsurance deductibles will be exceeded, with a higher proportion of net losses thus falling on reinsurers and creating additional rate rises in property excess of loss contracts.”

Also read:

– AIR lifts top-end of hurricane Ida loss estimate to $30bn, to include floods.

– Ida will be one of the costliest U.S. mainland hurricanes: Aon.

– Ida insured flood losses seen $11bn to $17bn by CoreLogic.

– RMS says hurricane Ida loss $25bn to $35bn, on Gulf region impacts only.

– Cat bonds to see valuation volatility after Ida’s north east flooding: ILS managers.

– Hurricane Ida loss estimates rising towards $30bn to $40bn: Goldman Sachs.

– Hurricane Ida insured wind & storm surge losses seen at up to $25bn by AIR.

– Ida remnant flood damage to add double-digit billions to storm costs: Aon.

– NFIP cat bonds & reinsurance in focus as Ida’s remnants flood New York.

– FedNat expects reinsurance recoveries for hurricane Ida.

– Hurricane Ida insurance market loss could reach $21bn: CoreLogic.

– Hurricane Ida insured losses close to $18 billion: KCC.

– Hurricane Ida will add momentum to reinsurance pricing: AM Best.

– The catastrophe bonds marked down on hurricane Ida threat.

– Hurricane Ida loss puts some aggregate covers at-risk: Fitch.

– Hurricane Ida to hit quota shares & excess-of-loss reinsurance: Moody’s.

– Hurricane Ida losses to fall more to reinsurance, but renewals influence low.

– Hurricane Ida data suggests $15bn to $25bn industry loss: Twelve Capital.

– Hurricane Ida insured losses expected in the double-digit billions.

– Hurricane Ida cat bond fund impact minor on latest track: Plenum.

– Hurricane Ida hits Cat 4, landfall location key to ILS market impact.