Ida's insurance impact likely to be boosted by pandemic pricing

Fednat Holding Co

30/08/2021 23:21

By Alwyn Scott
    NEW YORK, Aug 30 (Reuters) - Insurers are bracing for $15
billion to $30 billion in claims from Hurricane Ida, but the
figure could jump higher, in part because of pandemic pricing
that has pushed up the cost of lumber and labor to rebuild,
insurance experts said on Monday.
    The widely ranging estimates, based on models that track the
storm's severity and path, are still likely to be less than the
$87 billion in claims from Hurricane Katrina, when adjusted for
inflation, experts said.
    Insurance companies with significant exposure include
Allstate Corp  ALL.N , Progressive Corp  PGR.N , FedNat
 FNHC.O , Chubb Ltd  CB.BN , American International Group Inc
 AIG.N , Travelers Companies Inc  TRV.N  and The Hartford
 HIG.N , according to Piper Sandler analyst Paul Newsome.
    Ida was about one category weaker than Katrina was when it
made landfall 16 years ago, and that makes a large difference in
its destruction and financial cost, Newsome said.
    Insurers said they are asking clients about damage and
poring over satellite images to assess the wind impact. But
inspections are necessary to assess the amount of flooding.
    "The wind damage may be more visible, but you don't know the
extent of the water damage until you're actually able to
inspect," said Anne Wilson, property expert for the Americas at
Swiss Re AG  SRENH.S . "You have to get eyes on the ground."
    Insurance costs for residential flooding will largely be
covered by the U.S. National Flood Insurance Program (NFIP),
administered by the Federal Emergency Management Agency (FEMA). 
   
    Commercial policies, however, will face claims for direct
physical damage and also business interruption and supply chain
disruption that spread beyond the disaster area, said Robert
O'Brien, a managing director at the national property claims
practice of Marsh & McLennan Companies Inc  MMC.N .
    With power outages, floods, impassable roads and other
impediments, production can be disrupted for weeks and can
generate contingent claims by distant businesses unable to get
supplies from or sell products to companies hit by the storm.
    "Those involved parties could be anywhere," O'Brien said. "A
local event can ripple out across the world."
    Ida also likely will renew efforts to address problems with
NFIP, which was launched more than 50 years ago and is $20.5
billion in debt because the premiums are too low to cover the
cost of claims, said Craig Poulton, chief executive officer of
Poulton Associates, which administers flood and other insurance.
    "This event will serve as a reminder of the severity that
storms can bring," he said.  

 (Reporting by Alwyn Scott; editing by Richard Pullin)
 ((alwyn.scott@thomsonreuters.com; +13322191977; Reuters
Messaging: alwyn.scott.thomsonreuters.com@reuters.net))