2021 Atlantic hurricane season

Additional loss creep from 2021’s hurricane Ida has now eroded another layer of Louisiana Citizens’ catastrophe bond backed reinsurance protection, with the $50 million Class B notes of the residual market insurers’ Pelican IV Re Ltd. (Series 2021-1) cat bond set to pay out all of their principal in a reinsurance recovery.

Louisiana Citizens Property Insurance Corporation has reported an estimated loss from hurricane Ida of around $461 million, but thanks to its low retention on its reinsurance tower and its catastrophe bonds, the residual market insurer will only retain $35 million.

According to our sources, an early estimate of the National Flood Insurance Program’s (NFIP) losses from hurricane Ida suggests that its reinsurance program and catastrophe bonds are less likely to face any impact from the catastrophic event.

Two outstanding per-occurrence catastrophe bond tranches sponsored by Louisiana Citizens Property Insurance Corporation have been marked down much further on some broker pricing sheets in the last week, with secondary market bid pricing now implying a market expectation of a significant loss of principal.

Information from sources suggests that some primary insurance carriers are likely to recover significant amounts from their reinsurance arrangements after hurricane Ida, while a number of insurers are likely to exhaust their reinsurance towers completely, and some catastrophe bonds remain exposed.

A hurricane Ida industry loss estimate update from RMS has put the National Flood Insurance Program’s (NFIP) reinsurance counterparties and catastrophe bond investors on-watch for potential losses, as the estimate suggests the traditional reinsurance component at-least is likely to attach and face losses.

Catastrophe risk modelling firm RMS has now added a further $6 billion to $9 billion of insurance and reinsurance market losses to its industry estimate for recent hurricane Ida, adding the expected flood toll further north and taking the total estimate range to $31 billion to $44 billion.

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.

Catastrophe risk modeller AIR Worldwide now says that hurricane Ida will cost the insurance and reinsurance market between $20 billion and $30 billion, an estimate that now includes private market inland flood insured losses.

Hurricane Ida is expected to become one of the costliest tropical storm impacts ever to affect the mainland United States, according to insurance and reinsurance broker Aon.