Moody’s: Ida’s Impact Likely to Be Greater on Regional Insurers, State’s LA Citizens

August 31, 2021

While large, national property/casualty insurers with leading market shares in both the residential and commercial property markets in Louisiana will be exposed to losses resulting from Hurricane Ida, which hit the state on Aug. 29 as a Category 4 storm, regionally focused carriers will be more vulnerable to negative impacts from Ida, according to a report from Moody’s Investor Service.

In the homeowners sector, due to their careful monitoring of exposures, geographic diversification, high-quality reinsurance protection and strong capital bases, Moody’s said it believes large national carriers like State Farm, Allstate and USAA can withstand the losses from this hurricane event. Because to their geographic concentrations, however, regional insurers and residual markets, like Louisiana Citizens Property Insurance Corporation (LA Citizens), will have a more difficult experience, the Moody’s said in its report: P&C (re)insurers brace for losses as Hurricane Ida makes landfall in Louisiana.

Top 20 Louisiana Homeowners Multiple Peril Insurers in 2020

Company Direct Premium Written Market Share
State Farm Fire and Casualty Co. $487,412,633 23.66%
Louisiana Farm Bureau Mutual Insurance Co. $93,286,950 4.53%
Allstate Insurance Co. $87,066,612 4.23%
Progressive Property Insurance Co. $80,282,066 3.90%
United Property & Casualty Insurance Co. $70,136,248 3.40%
Allstate Indemnity Co. $61,439,633 2.98%
Lighthouse Excalibur Insurance Co. $56,347,626 2.73%
United Services Automobile Association $50,805,245 2.47%
Allstate Vehicle and Property Insurance Co. $46,882,991 2.28%
Fednat Insurance Co. $46,807,218 2.27%
Southern Fidelity Insurance Co. $43,207,642 2.10%
Liberty Personal Insurance Co. $42,662,137 2.07%
Safeco Insurance Co. of Oregon $39,909,491 1.94%
Maison Insurance Co. $34,510,569 1.67%
Shelter Mutual Insurance Co. $34,463,334 1.67%
Geovera Specialty Insurance Co. $33,675,411 1.63%
USAA Casualty Insurance Co. $33,647,927 1.63%
Foremost Insurance Co. Grand Rapids, Michigan $32,797,267 1.59%
Centauri National Insurance Co. $32,768,566 1.59%
Allied Trust Insurance Co. $30,162,012 1.46%
Top 20 $1,438,271,578 69.81%
Other $622,136,669 30.19%
Total 135 Companies $2,060,408,247 100.00%

Source: Louisiana Department of Insurance

“It will take months to determine the magnitude of insured damages and the degree to which the hurricane affects primary property and casualty (P&C) insurers and regionally focused carriers, which are most vulnerable. Some of the losses will make their way to the reinsurance market through quota-share and excess-of-loss contracts. The U.S. Gulf Coast is a peak catastrophe zone for reinsurers, and those with exposure to Louisiana and surrounding states could incur meaningful losses,” the report states.

The Associated Press reported on Aug. 30 that Ida’s financial impact is expected to be less severe that wrought by Hurricane Katrina, which made landfall 16 years ago not far from the location where Ida swept ashore, due to Ida’s lower storm surge and improvements to the levee system protecting New Orleans.

“Analysts at Boenning & Scattergood, a financial consultancy, noted that Ida’s wind-field is smaller than Katrina, which likely narrows the area of catastrophic damage,” the AP reported. “The analysts estimated that losses for the insurance industry will hit around $10 billion, far less than the $90 billion-plus in insured losses from Katrina.”

Moody’s pointed out in its report that while homeowners policies typically do not cover flood damage, economic losses from flooding could reach the billions of dollars. Commercial property insurers, meanwhile, could be exposed to flooding losses as flood coverage is typically an option in commercial property policies.

Apart from property losses, commercial policies typically cover business interruption claims, which could be sizable. While preliminary reports show the improved levee system around New Orleans to have held, the hurricane triggered widespread power outages. Reuters reported that as of early on Aug. 30, more than 1 million Louisiana homes and businesses had lost electricity. Damage to the power grid was so extensive that officials warned it could be weeks before it can be repaired, the AP reported.

In addition to residential and commercial property losses, P/C insurers also “face potential claims on private passenger and commercial vehicles, watercraft and other insured assets,” Moody’s report states.

Top 20 Commercial Multiple Peril Insurers, Non-Liability, in 2020

Company Direct Premium Written Market Share
State Farm Fire and Casualty Co. $46,203,759 10.87%
Ace American Insurance Co. $27,559,997 6.48%
National Union Fire Insurance Co. of Pittsburgh, Pa. $24,274,681 5.71%
Scottsdale Insurance Co. $20,474,820 4.82%
United Specialty Insurance Co. $15,564,413 3.66%
Church Mutual Insurance Co., S.I. $13,787,470 3.24%
Independent Specialty Insurance Co. $13,279,861 3.12%
Steadfast Insurance Co. $13,018,661 3.06%
Ohio Security Insurance Co. $9,894,534 2.33%
Interstate Fire & Casualty Insurance Co. $9,797,524 2.31%
Guideone Insurance Co. $9,519,685 2.24%
Amguard Insurance Co. $8,834,639 2.08%
Agcs Marine Insurance Co. $8,327,151 1.96%
Guideone Specialty Insurance Co. $7,969,963 1.88%
Third Coast Insurance Co. $7,660,386 1.80%
Bankers Insurance Co. $6,413,874 1.51%
Travelers Property Casualty Co. of America $6,279,555 1.48%
Safety Specialty Insurance Co. $5,494,680 1.29%
Federal Insurance Co. $5,155,948 1.21%
American Capital Assurance Corp. $4,887,183 1.15%
Top 20 $264,398,784 62.21%
Other $160,640,525 37.79%
Total 243 Companies $425,039,309 100.00%

Source: Louisiana Department of Insurance

LA Citizens, the state’s property insurer of last resort will likely bear a “significant share of losses along the Louisiana coast,” Moody’s said.

“As a residual market insurer, its risk exposures are concentrated in major cities and in the most hurricane exposed areas of the state,” Moody’s report states. “LA Citizens sustained large losses from Hurricanes Katrina and Rita in 2005 (approximately $1.1 billion net), which exhausted existing claims-paying resources, requiring regular assessments on insurers operating in the state, as well as the issuance of $978 million in revenue bonds backed by future emergency assessments on Louisiana policyholders in subject lines of business. To repay the bonds, LA Citizens is collecting an assessment of 2.49% of premiums for 2021 (down from 2.60% last year).”

Moody’s noted that currently, LA Citizens “has $545 million in total reinsurance and catastrophe bonds in place to pay storm losses,” as well as “a $50 million line of credit with Regions Bank for additional liquidity.” The insurer can assess insurers in Louisiana “for up to 10% of their written property premiums to help cover its deficits each calendar year,” Moody’s said.

New Orleans Firefighters assess damage as they look through debris after a building collapsed from the effects of Hurricane Ida, Monday, Aug. 30, 2021, in New Orleans, La. (AP Photo/Eric Gay)

Ida struck Louisiana on the 16th anniversary of Hurricane Katrina’s landfall as a Category 3 storm that devastated the Mississippi and Louisiana coasts. Katrina was blamed for 1,800 deaths and caused levee breaches and catastrophic flooding in New Orleans. According to the Insurance Information Institute, Katrina remains the costliest U.S. hurricane on record. The massive 2005 storm caused $65 billion in insured losses when it occurred, an amount that includes losses from the National Flood Insurance Program (NFIP), according to the I.I.I. In 2020 dollars, losses resulting from Katrina totaled $86.6 billion.

President Joe Biden has approved Louisiana Gov. John Bel Edwards’ request for a Presidential Major Disaster Declaration due to the severe impact from Hurricane Ida.

Topics Carriers Louisiana

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