Hurricane Ida (2021)
A Category 4 hurricane that hits Louisiana on August 29, 2021, then floods the northeastern United States with its remnants; an insured loss of several tens of billions that hit low layers and brought down local insurers.
On August 29, 2021, sixteen years to the day after Katrina, Ida makes landfall on the Louisiana coast near Port Fourchon as a Category 4, with winds of about 150 miles an hour. It cuts power to more than a million customers around New Orleans, tears off roofs, then, through its remnants, causes flash floods in the northeast on September 1: flooded basements in New York and New Jersey, with dozens of deaths. Insured loss estimates, in the range of thirty billion dollars, make it one of the biggest losses of the year. For reinsurance, three facts. The loss came after a renewal and a summer of 2021 that had already begun to make low layers pay, putting pressure on the working layer. Several small Louisiana and Florida insurers, already weakened by Hurricanes Laura and Delta in 2020, became insolvent, which brought out the credit risk of the regional cedants on which capital was concentrated. And the Northeast flooding, which homeowners' policies exclude, was a reminder of the boundary between wind and water, on which the split between private insurers and the federal flood insurance program depends.
Textbook case. Regional Louisiana insurer with USD 300M of homeowners premiums, a cat program of USD 150M excess of USD 50M, and a gross Ida loss of USD 190M. The USD 50M retention is used up and the layer pays USD 140M. The insurer's capital falls below the regulator's threshold, and its reinsurers face a cedant whose solvency is in question, hence payment guarantees and letters of credit required going forward.
Hurricane Ida, Ida 2021, Ida Louisiana, Ida New York flooding, Ida insured loss
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