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Louisiana Citizens records $439mn Ida loss in Q3

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Louisiana Citizens Property Insurance had booked $439mn in Hurricane Ida losses by 30 September, implying the disaster will nearly wipe out five of its six traditional reinsurance layers and two cat bond tranches, according to Q3 financials updated on its website this month.

The state-backed insurer’s loss pick includes incurred but not reported (IBNR) reserves of $318.4mn, on top of case reserves of $120.6mn. It expects to cede $426.1mn of these claims to its reinsurers, who were among the carriers expected to face an early Ida claim given the low retention on Citizens’ programme.

The financials showed Citizens had paid losses at 30 September of $22.1mn, reaching 63% of the $35mn incurred at that point to clear its reinsurance retention.

The Louisiana cedant buys $545mn of total reinsurance cover including $125mn in two Pelican Re cat bonds and a $60mn Catahoula cat bond issued in 2020.

The Catahoula cat bond triggered at $245mn of losses, in line with its fourth traditional reinsurance layer, and the $75mn junior Pelican Re Class A tranche triggered at $345mn from a first-event storm, alongside its fifth layer.

At $439mn, Ida losses would wipe out the Catahoula bond and the bulk of the Pelican Re Class A notes, nearly reaching into the final layer of its traditional reinsurance programme, with its Pelican Re “top and aggregate” class B notes above that.

Both of these cat bonds are now priced for a full loss on the secondary market, according to pricing sheets from earlier in November.

In the early weeks after the disaster, the lower-lying Catahoula Re bond had been marked down significantly, but not to this extent.

Earlier this week the Louisiana Insurance Commissioner noted that Louisiana Citizens had agreed to offer temporarily higher limits to commercial insurance buyers.

It will offer up to $10mn per building and $20mn of total coverage per insured, up from $5.5mn and $11mn for the next two years before re-evaluating the limits on offer.

The last time commercial limits were raised was in 2013.

The state-backed insurer is expected to face higher demand from residents as private carriers pull out or cut back their appetite within the state, after two punishing years of hurricane losses.

“The board of Louisiana Citizens has taken prudent steps to ensure that Citizens can accommodate a wider range of properties if businesses and homeowners can’t find coverage in the private sector,” said Commissioner Donelan in the statement. “Citizens is prepared for changes in the private market after the tough back-to-back storm seasons we just experienced.”

The regulator also recently placed two struggling homeowner carriers, Access Home Insurance Co and State National Fire Insurance Co, into receivership.

“The move is an important step toward the Louisiana Insurance Guaranty Association (LIGA) taking over claim payments, ensuring that most policyholders with pending hurricane claims will get paid,” the Commissioner’s statement noted.

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