Isaac Losses Won’t Strongly Impact P/C Industry in Louisiana

While insured losses in the United States from Hurricane Isaac likely will fall between $1 billion and $2 billion, according to some risk management experts, the storm’s impact will not severely impact the property/casualty insurance industry in Louisiana, the state’s top insurance regulator says.

The $1 billion to $2 billion estimate by Risk Management Solutions (RMS) excludes rainfall driven flood losses and all National Flood Insurance Program losses, which are likely to be high in Louisiana, according to Insurance Commissioner Jim Donelon.

“I dare say that this was perhaps a bigger flood event than wind event,” Donelon told Insurance Journal. “The devastation in outlying areas around New Orleans from flood was quite substantial.”

He noted that although the loss of life from Isaac was incomparable to the number of deaths associated with Hurricane Katrina in 2005, Isaac’s storm surge was similar.

The Associated Press reported that seven deaths in Louisiana and Mississippi have been attributed to Isaac. More than 1,800 lives were lost as a result of Hurricane Katrina.

Hurricane Isaac first made landfall in Louisiana on Aug. 28 as a Category 1 hurricane, near the mouth of Lake Mississippi. It made a second landfall of the same intensity near Port Fourchon, La. on Wednesday, Aug 29. The storm then continued to move northwest very slowly across Louisiana, was downgraded to a tropical storm, and finally dissipated on Sept.1 in Missouri, RMS reported.

Donelon said it is possible insured losses in Louisiana could come in at around half a billion dollars on the low end. However, he added, the high side estimate is around $1.5 billion.

“Using the middle ground of a billion, that comes in just under half of what Hurricane Gustav was in Louisiana four years ago, 2008,” Donelon pointed out.

Dr. Christine Ziehmann, director of Model Product Management at RMS, noted: “From a wind-damage perspective, Isaac made landfall in the same area where Katrina and also Gustav made landfall in 2005 and 2008, respectively. … Both these previous events impacted the building stock and eradicated a large portion of very low-quality roofs and buildings, which could mean that the wind losses fall into the lower end of the modeled range.”

The state’s insurer of last resort, Louisiana Citizens Property Insurance Corp., is expecting between 15,000 and 17,000 claims as a result of Isaac with most claims averaging a little over $5,000, the Associated Press reported.

A high percentage of claims will likely be less than their hurricane deductible, which is 2 and 5 percent of damage incurred during a storm, according a top company official.

Donelon said he doesn’t expect Isaac losses to greatly impact the overall property/casualty insurance industry in his state.

“The expectation is that [Isaac] would have minimum, if any, effect on our market. Gustav did not affect our market one way or the other, neither from an affordability cost point of view nor from an availability,” perspective, Donelon said.

Insured losses from Gustav reached $2.2 billion in Louisiana, Donelon pointed out. “None of our companies left our market,” he said, adding, “we continued to have a viable marketplace for property insurance thereafter.”