Ted Gregory, director of Operations – PCS, Claims Solutions spoke to Emerging Risks about the continuing complexity associated with Hurricane Ida loss assessment.
-You’ve indicated that Ida is a particularly complex loss in terms of assessment- what are the factors behind this?
First of all, Louisiana had a very significant impact from 2020, with multiple hurricanes that effectively hit the state, with Hurricane Laura and others. That actually put the state in bad condition leading into 2021, so that once Hurricane Ida hit, that compounded the issue.
With Hurricane Ida as we currently stand, the impacts are becoming insolvent, as a matter of fact. Losses are coming in, at a slower rate, but they are still coming in, and three insurers in fact have gone into receivership because they have become insolvent: State National; Access Home; and most recently Americas Insurance Company. So, the impact of Ida not just to the insureds but to the industry as a whole, what with these companies becoming insolvent, is a significant challenge.
Which raises a potential red flag about the level of their reinsurance protection?
Yes, that and of course the ability of these companies to be able to cover these losses themselves and to service their policy holders, whether they are individual families or companies with commercial losses. When it comes down to the ground level, the perception when it comes to folks seeing that companies are becoming insolvent is that they become nervous. And the state becomes nervous.
The problem of insurance becomes involved as well, and with all that activity going on of course it leads into less confidence in the industry. So it is incumbent on those that are still out here, working these claims, to articulate just that: claims are still being worked; claims are still being paid; and businesses and insurers are being made whole again.
-Is the geographical extent of expected losses a significant /unusual factor here?
Ida was a bit different because it was somewhat like three storms in one, with it having a significant impact on Louisiana, on the Gulf Coast of course, then as it travelled inland across the middle of the United States, various other states were affected as well. Then it also caused some significant losses moving in to the Northeast region, impacting New York, New Jersey and Connecticut with significant flooding.
So, with all those areas of the US being affected – Louisiana being the most affected, of course, followed by the Northeast – it presented some challenges for the insurance community as a whole. Adjusters, claims companies and the like were able to handle the volumes, but it presented a challenge.
-In terms of the geographical spread of losses, is Ida an outlier, or is it becoming more typical of what we can expect from these big US nat cat events?
One thing we don’t do at PCS is any forecasting! We take it as it comes. But as we can see from the recent trend, going back to 2017, starting with Harvey, Irma and Maria, followed by 2018 with Hurricanes Florence and Michael, and then 2020 with Laura and others and now Ida, unfortunately we have a very bad trend over the past five years.
-Flood seems to me to be an increasingly important component of losses?
Indeed, especially from a commercial standpoint. Again, from a PCS standpoint we do receive information from FEMA, specifically regarding national flood insurance programme information. Our own estimates, of course, we don’t include NFIP information, but yes, when we look at the most recent events – Ida, Laura as well – flood has been a significant concern with that.