The location of hurricane Ida’s anticipated strong-to-major hurricane landfall in Louisiana on the US Gulf Coast will be key to insurance-linked securities market impacts from the storm.
NOAA hurricane hunter reconnaissance aircraft have visited the storm in the last hour and suggested possible surface winds as high as 160 mph, meaning hurricane Ida could be approaching Category 5 strength.
Catastrophe risk modeller RMS has highlighted that hurricane Ida’s wind-field is smaller than 2005’s Katrina was, with the firms HWind unit giving Ida an Integrated Kinetic Energy measurement of 45 TJ , compared to Katrina that was around double.
Market sources we’ve spoken with in the last hour suggest an industry loss of above $10 billion should be anticipated from hurricane Ida, with the precise track the storm takes over the next few hours set to drive the eventual quantum.
“Landfall is predicted to occur very early morning on Monday 30 August.
But qualified this by adding, “However, as with all live events, there is a high level of uncertainty around the final strength and location of landfall.
In his Friday evening update on the storm that became hurricane Ida, Siffert explained, “Either a strong Category 2 or Category 3 hurricane making landfall somewhere between Grand Chenier, LA, and the Mississippi Delta will be impactful to the insurance industry.
“It could range from a simple single-digit billion dollar loss to a 10’s of billions dollar loss if the storm were to track closer to a major metro area like New Orleans.
As of Saturday morning, our industry sources told us that modelled loss scenarios being discussed continued to range from a low single digit billion dollar industry loss, up to as high as $40 billion, depending on the landfall location.
We’ve spoken to some industry contacts this morning, Sunday, that are suggesting if hurricane Ida does not weaken before coming ashore at landfall and continues on the current forecast path, so remaining closer to New Orleans, then the insurance and reinsurance market loss could easily rise above $10 billion, possibly closer to $20 billion.
Impacts to the ILS market are always challenging to predict, but at major hurricane strength some level of ILS market impact is likely.
The higher the eventual industry loss rises, the more likely it is that some cat bond losses could be seen, but again this is very dependent on landfall location and the ultimate size of the insurance industry loss from hurricane Ida.
As of Sunday we’re told there has been some buying interest, but our broking sources suggested no trades have actually been made at this time.
The energy sector has largely shut down in the path of hurricane Ida and losses to some offshore or onshore assets that could not be moved is likely to occur with a storm of this intensity.
Our primary focus is on catastrophe bonds, insurance-linked securities, alternative reinsurance capital, insurance & reinsurance linked investments.