Hurricane Zeta made landfall in Louisiana with 100 mph sustained winds yesterday evening, having intensified as it approached the Gulf Coast, against meteorologists earlier expectations.
The hurricane, now the fifth major tropical storm to impact Louisiana in what has been a tiring year of weather for the state, had originally been forecast to have little chance of intensifying as it moved closer to land.
But defying the experts, hurricane Zeta put on a spurt of intensification, adding 30 mph to its winds in the final day of travel across the Gulf of Mexico.
Moving rapidly, hurricane Zeta has taken its winds further inland than some of the other recent hurricanes, raising the potential for the swathe of damage to extend a little further than storms such as recent Sally.
Sally has been given an insurance and reinsurance market loss estimate in a range from $1 billion to $3.5 billion by the main catastrophe risk modellers and it seems likely hurricane Zeta will be in a similar range, perhaps slightly higher if the inland wind damage does prove to have extended further.
As such, hurricane Zeta will be the latest attritional weather loss coming on the heels of what has been an expensive third-quarter.
Already hurricanes Delta and Zeta will now be adding to U.S. insurers costs and perhaps driving further reinsurance recoveries for them.
At the least, hurricane Zeta will exacerbate some of the erosion of aggregate reinsurance deductibles seen on certain contracts in the market, potentially also some further erosion of annual aggregates for any exposed catastrophe bonds covering Gulf wind risks.
Hurricane Zeta has caused power outages to over 700,000 people across the states of Louisiana, Mississippi and Alabama.
New Orleans has been impacted by the storm and given the more central Louisiana track of Zeta, it does seem to have brought some of its strongest winds to areas of higher exposure than other storms this year.
That could exacerbate the levels of damage seen and potentially elevate the eventual insurance and reinsurance market loss somewhat, although it would still be expected to settle in the low to mid single digit billions of dollars, our sources suggest.
The 2020 hurricane season has now thrown 11 named storms and six hurricanes at the United States, with costs of more than $30 billion and insured losses estimated as somewhere up to $26 billion if you include Mexico and the Caribbean, according to risk modellers.
The graphic below was shared by Steve Bowen, Director & Meteorologist, Head of Catastrophe Insight, Aon:
Add in hurricane Zeta and insurance and reinsurance market losses from the 2020 Atlantic tropical storm season could be moving nearer to $30 billion, once all public and private insured losses both onshore and offshore are accounted for.
That really is a season of attrition, as in some seasons a single storm may drive almost that level of insurance market losses.
Alongside the severe weather and wildfires experienced in the United States, 2020 is turning into a good test of frequency reinsurance protection and aggregate layers are increasingly coming into play.
Given where ILS funds and catastrophe bonds generally play in the reinsurance tower, Zeta is likely to be another event where the majority of the losses fall to insurers and a portion is shared through quota shares, some aggregate contracts and a few occurrence layers for smaller carriers. As a result, the impact to the ILS market will be attritional at most.