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

Catastrophe risk modeller RMS has provided the clearest view of the escalation in industry loss estimates for recent hurricane Ida, pegging the total onshore and offshore losses for the Gulf region at between $25 billion and $35 billion.

This doesn’t include any of the damages experienced further north from hurricane Ida’s track and remnant flooding, suggesting there is a relatively significant addition to make to the total.

RMS’ estimate is a particularly wide range though, which perhaps reflects how challenging a loss event the hurricane is expected to present to the insurance and reinsurance industry.

RMS said late yesterday that onshore and offshore U.S. insured losses from hurricane Ida in the Gulf of Mexico are expected to be between $25 billion and $35 billion.

This is based on an insurance and reinsurance market loss of between $21 billion and $28 billion for wind and surge damages, $1 billion to $1.5 billion for inland flooding in the Gulf states only, $700 million to $1.5 billion for offshore energy damages, plus between $2.3 billion and $4 billion of losses to the National Flood Insurance Program (NFIP) across the four impacted Gulf Coast states (Alabama, Florida, Louisiana and Mississippi).

It’s the highest estimate so far from any catastrophe modeller and even the wind and storm surge damage estimate of up to $28 billion is above competitors such as AIR’s up to $25 billion, KCC’s around $18 billion and CoreLogic’s up to $21 billion.

RMS’ catastrophe loss estimate includes wind, storm surge, and inland flood losses across only the impacted Gulf states in the landfall region — Alabama, Florida, Louisiana and Mississippi.

The company said it will put out an estimate for the wind and inland flooding impacts in Ohio Valley, Mid-Atlantic, and Northeast U.S. regions, once the full extent of damage is known.

As we wrote yesterday, analysts at Goldman Sachs said insurance and reinsurance industry loss estimates for hurricane Ida are rising towards the $30 billion to $40 billion mark.

RMS’ estimate shows this is likely to be the kind of range the industry will be considering, once all private market losses and NFIP impacts are combined.

The NFIP loss estimate from RMS is also helpful, as we know that the NFIP’s traditional reinsurance cover attaches at around $4 billion of losses to the Program.

With RMS estimating between $2.3 billion and $4 billion of losses to the NFIP just for the lower states, it seems possible the Program’s reinsurance attaches once losses from flooding along Ida’s passage north and east are also factored in.

The NFIP’s catastrophe bonds all attach higher up, but are likely to continue to be considered at risk for the coming weeks until greater clarity over the NFIP’s claims from hurricane Ida is available.

“Ida was truly a multi-faceted event in terms of hazard and loss impacts. RMS virtual reconnaissance efforts and analysis of aerial imagery show widespread wind and water-related damage in Louisiana and neighboring Gulf Coast states, including many severe or total structural losses. From a wind perspective, this storm was a design level event, where observed wind speeds often exceeded speeds that buildings have been designed to withstand, particularly in the hardest hit areas in southern Louisiana. Many areas impacted by Ida’s winds were also impacted by storm surge, precipitation-induced flooding, and the hurricane events of 2020. In these instances, loss attribution and differentiation may become more complex, leading to longer claims settlement periods,” explained Jeff Waters, Senior Product Manager, RMS North Atlantic Hurricane Models.

RMS’ modelled insurance and reinsurance market loss estimate factors in property damage and business interruption to residential, commercial, automobile, industrial, infrastructure, marine cargo and specie, watercraft, and other speciality lines of business, along with post-event loss amplification (PLA) and non-modeled sources of loss.

“Ida was near Category 5 intensity at its landfall and remained for six hours at Category 4 intensity moving inland. The buildings and infrastructure in this region have never experienced such a strong hurricane wind intensity. Due to major damage to power plants, as well as transmission and distribution lines, the widespread power outage will significantly delay full recovery. We expect material impacts to specialty lines from this event. Southern Louisiana has a high concentration of petrochemical plants, refineries, marine cargo and port exposures, power plants and other high-value industrial facilities that were impacted by Ida. These businesses rely heavily on the state’s power grid. With prolonged anticipated recovery times, we expect material business interruption losses to these lines on top of varying degrees of infrastructure damage they sustained,” Mohsen Rahnama, Chief Risk Modeling Officer, RMS said.

RMS said that it expects wind losses from hurricane Ida to be driven by residential lines, and insured water-related losses to be dominated by commercial and industrial lines.

On the offshore damage component, Rajkiran Vojjala, Vice President, Model Development, RMS, said, “Ida damaged many offshore platform-related hubs and staging facilities in coastal Louisiana, including Port Fourchon. As a result, more than 90 percent of the Gulf of Mexico oil and gas production is still shut-in, representing approximately 15 to 20 percent of the U.S. total fuel supply. Offshore damage surveys to date, reviewed by the RMS Geospatial Analysis team, indicate wind and wave-driven damage to several high-valued platforms. Inspections and damage assessments are still ongoing, so, it’s likely we won’t know the full extent of loss to this sector for several weeks. However, as Ida tracked quickly through the Gulf, the lower than expected wave heights are expected to limit physical damage to rigs and platforms.”

“As expected, Ida underwent rapid intensification in the hours leading up to landfall as it moved over favorable oceanic and atmospheric conditions in the Gulf of Mexico. At landfall, the storm was most similar to that of Hurricanes’ Betsy (1965), Camille (1969), and Laura (2020) in terms of intensity and overall Integrated Kinetic Energy. Remarkably, the storm maintained its Category 4 intensity for six hours after landfall. Ida’s slow rate of decay was due to unique surface roughness conditions in that region, which limited the frictional weakening effects it could impose on the storm. That combined with an eastward shift in the track closer to areas of high exposure, such as the New Orleans metropolitan area, exacerbated wind and water-related impacts further inland,” Tom Sabbatelli-Goodyer, Director, Event Response, RMS also commented.

Also read:

– 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.