Expect average claim to be higher, says AIR as it ups Ida loss estimate

Catastrophe risk modelling firm  AIR Worldwide has increased its insured loss estimates for Hurricane Ida after analysing the inland flood impacts across the entirety of its track, including the Northeast. At the same time, it has warned insurers to expect the average claim to be higher due to increased repair and reconstruction costs.

AIR now estimates that Ida’s insured industry losses will range from $20 billion to $30 billion. The estimate for wind and storm surge losses will range from $17 to $25 billion, and private-market insured losses from inland flooding will range from $2.5 billion to $5 billion.

Included in the estimates are losses to onshore residential, commercial, industrial properties, and automobiles for their building, contents, and time element coverage, as well as estimated insurance take-up rates for wind and flood across the entirety of Ida’s track, including the flooding that occurred in the Northeast.

AIR’s losses do not include any estimate of losses from the National Flood Insurance Program, or any losses from offshore assets.

The industry loss estimates also reflect an adjustment to account for increased material and other repair costs in the current construction market, it noted.

Hurricane Ida made its first landfall as a Category 4 storm near Port Fourchon, Louisiana on August 29, and second landfall just hours later southwest of Galliano, Louisiana. The storm produced heavy rains and dangerous storm surge.

The remnants of Ida doused the Northeast and caused flooding damage and disruption across the region. Flooding was reported from Pennsylvania to Massachusetts, with New York, New Jersey, and Pennsylvania bearing the brunt of the impact.

AIR reported that in addition to the precipitation-induced flood impacts, damage was reported across several states due to hurricane-spun tornadoes. Further, some of the neighbourhoods across the inland and northeastern states saw damage resulting from trees falling on homes. There were reports of many trees uprooting due to antecedent saturated soil conditions due to rainfall from Hurricane Henri a few weeks ago. Claims arising from these would be paid under the wind category.

According to AIR and Xactware analyses, materials costs have gone up significantly in the past year from supply chain disruption in the construction market. Although these costs have moderated since their peak in July when they were 80 percent higher than September of last year, they remain about 30 percent higher. Repair and reconstruction costs are also up significantly.

The cat modeller warned companies to bear these increases in mind and expect the average claim to be higher before considering demand surge.

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