Hurricane Ida's Insured Losses Could Fall Hardest on Commercial Lines

Hurricane Ida's trajectory and proximity to the New Orleans area could tilt insured losses from the storm more toward the insurance industry's commercial lines than to personal lines, according to A.M. Best.

"Property damage and business interruption losses may contribute more heavily to overall losses than did Hurricane Laura last year, which had a greater impact on personal lines business," a Best statement said.

The rating agency noted that Louisiana insurers were already trying to get beyond a 2020 spike in weather-related losses. More than 300,000 claims were attributable to 2020's Hurricanes Laura, Delta, and Zeta, according to Best.

Best also said that a surge in demand for materials and goods following Hurricane Ida could increase the level of insurance and reinsurance losses meaningfully, especially given a 5.4 percent increase in the US consumer price index from a year earlier.

Best suggested that losses from Hurricane Ida aren't expected to have an impact on insurers' overall capital levels due to the number of regional insurers in the market that will likely be able to cede larger losses to reinsurers.

While the (re)insurance industry should be able to absorb the losses without an impact on capital positions, Hurricane Ida will add to uncertainty about the growing frequency of catastrophic weather events and provide momentum to reinsurance pricing, Best said.

Best noted that Hurricane Ida made landfall in Louisiana on the 16th anniversary of Hurricane Katrina but generated less severe storm surge than the earlier storm. "The infrastructure improvements made since 2005 may curtail losses as the new levee systems have thus far performed as expected," Best said.

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