Hurricane Ida insured loss estimate nears $18 billion in the U.S.

The Category 4 storm caused significant structural damage and flooding in Louisiana, Mississippi, and Alabama.

New Orleans firefighters assess damages as they look through debris after a building collapsed from the effects of Hurricane Ida on Monday, Aug. 30, 2021, in New Orleans, La.

Early estimates from Karen Clark & Company (KCC) indicate that insured losses from Hurricane Ida will be near $18 billion in the U.S. and $40 million in the Caribbean, not including privately insured damage to residential, commercial and industrial properties, offshore properties, autos, boats or NFIP losses.

Ida made two landfalls on its course: first hitting Cuba on August 27 with maximum sustained winds of 80 mph and then making landfall as a Category 4 storm near Port Fourchon, La., on August 29 with maximum sustained winds of 150 mph. The timing of Ida’s impact on Louisiana landed on the 16th anniversary of Hurricane Katrina, the costliest storm in U.S. history.

According to KCC, the damage caused by Ida in Cuba and the Cayman Islands is limited to non-structural damage, downed trees and power outages. In Louisiana, coastal areas experienced significant structural damage to commercial and residential buildings from damaging winds, with low-level wind damage extending farther inland into southern Mississippi.

New Orleans saw strong hurricane-force winds that tore at awnings and ripped roof coverings from buildings. However, KCC noted that most of the structural damage reported is from older homes and businesses. Smaller levees southeast of New Orleans also were overtopped during the storm.

Flood losses in the billions

A CoreLogic analysis released Sep. 1 places total insured flood loss for residential and commercial properties in Louisiana, Mississippi and Alabama at an estimated $6 billion to $9 billion, including storm surge and inland flooding damage. CoreLogic also estimates that insured and uninsured losses from wind, storm surge and inland flooding damages to residential and commercial properties in affected U.S. areas will be between $27 billion and $40 billion. More than 90% of all losses are expected to come from Louisiana.

“While only 40 to 50% of the flood damages from Hurricane Ida appear to be covered by insurance, this is actually an improvement from the uninsured flood damages we saw from Hurricanes Harvey and Katrina,” said Tom Larsen, principal, insurance solutions at CoreLogic, in a press release. “The flood insurance gap is shrinking.”

KCC reported that the peak storm surge from Hurricane Ida exceeded eight feet along the Louisiana coast. Lower levels of storm surge were seen from the central Louisiana coast to Mobile, Alabama.

According to CoreLogic data reported by The Insurance Information Institute (Triple-I), a storm surge from a Category 4 hurricane, such as Ida, could potentially affect 6.46 million single-family residential homes.

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Commercial P&C Insurance

Commercial Office Space Set for a Strong Comeback

The sustained increase in demand for office space across the nation since late 2022 suggests that the market has moved past its lowest point, according to insights from the real estate technology platform, VTS. Demand for office space began to rise in late 2022 and continued into early 2023. Since then, the office market has experienced a period of stability and growth, supported by favorable economic factors, indicating a market rebound. This conclusion is drawn from the VTS Office Demand Index (VODI), which tracks unique new tenant tour requests for office properties in key U.S. markets. The VODI serves as an early indicator of future office leasing activity. According to the index, demand for office space has grown consistently over the past 12 months, closing the second quarter with a 17% year-over-year increase and a 34% rise from the VODI’s lowest point in December 2022. A significant shift in office-based employment patterns further supports the belief that demand for office space has stabilized. After reaching its peak in August 2022, office-based employment declined by 3.9% in early 2024. However, this trend has since stabilized, and employment growth has remained steady. Additionally, a recent decrease in work-from-home rates has fueled the renewed demand for office space. “They say you can only recognize a market bottom after it has passed, and the office space market is no exception. Following what we now see as the bottom, the national demand has gradually increased, though it remains susceptible to economic challenges,” said Nick Romito, CEO of VTS. “However, the growth observed in VODI over the past 18 months, coupled with positive trends in the office-using workforce, suggests that the market has reset, and the worst is behind us.” It’s important to note that this national trend does not impact all local markets equally. Cities like Los Angeles and New York City have seen healthy growth in office space demand, while markets such as San Francisco and Washington, D.C., have experienced prolonged stagnation. In Los Angeles, office space demand surged in the second quarter, briefly surpassing pre-COVID levels, driven by an increase in the average size of office spaces sought by tenants. New York City followed a similar overall pattern, though with some softness in the second quarter. Conversely, San Francisco’s demand for office space remains unpredictable, largely due to its tech-focused workforce, which continues to favor remote work more than other industries. “Markets heavily dependent on the tech sector, like San Francisco and Seattle, are on a markedly different post-COVID recovery path compared to more diversified markets like Los Angeles and New York City. It may take some time before we see office demand in San Francisco and Seattle return to pre-COVID levels,” added Ryan Masiello, Chief Strategy Officer at VTS.

Cyber Liability

Global IT Outage Puts Business Interruption Insurance in the Spotlight

In July, a global IT outage had a significant impact on business interruption insurance policies, overshadowing the effects on cyber insurance coverages. “This incident wasn’t a result of a malicious attack, which is why typical cyber insurance policies may not have been activated,” explained Peter McMurtrie, a partner in West Monroe’s insurance sector, in an interview with PropertyCasualty360.com. “Where coverage was applicable, factors like deductible amounts, waiting periods, and coverage limits played a critical role in determining the extent of exposure,” McMurtrie noted. “Standard policies for small businesses were less likely to offer coverage, while more complex policies for mid-sized companies and Fortune 500 corporations may have included broader triggers for non-malicious outages caused by third-party software issues.” The outage was triggered by a software update on July 19, 2024, by cybersecurity firm CrowdStrike, which affected organizations worldwide using Microsoft Windows. This interruption had far-reaching consequences, including disrupting hospital systems, media outlets, financial institutions, delaying thousands of flights, and halting daily business operations. McMurtrie emphasized that while the initial impact of the outage was similar for both large and small businesses, the ability to recover operations and whether insurance covered the loss of business income varied. “Larger companies are more likely to have advanced disaster recovery plans that ensure service redundancy following unexpected outages,” he added. “Their insurance programs also tend to cover a wider range of incidents.” According to Microsoft, the CrowdStrike update error affected over 8.5 million Windows devices globally. The incident highlighted the interconnected nature of our global ecosystem, including cloud providers, software platforms, security services, and their clients. “It’s a stark reminder of the importance of prioritizing safe deployment and disaster recovery across the tech industry,” the company said in a blog post. McMurtrie pointed out that the outage’s widespread impact was largely due to its effect on organizations that are critical to societal infrastructure—sectors like agriculture, airlines, banking, energy, government, healthcare, manufacturing, and retail. “Insurance companies base their risk appetite on their ability to understand and price risks appropriately. This becomes increasingly challenging with emerging threats,” he said. “However, I anticipate that insurers will respond by clarifying policy language, refining risk selection criteria, and possibly developing new products specifically designed for this evolving exposure.”

Hurricane Ida insured loss estimate nears $18 billion in the U.S.