Laura’s damage may cost insurers $15 billion
(Bloomberg) -- Hurricane Laura raked across Louisiana early Thursday, becoming one of the most powerful storms ever to hit the state with a “catastrophic storm surge,” flash floods and devastating winds that could inflict more than $15 billion in insured losses.
The storm came ashore at 1 a.m. local time near Cameron, Louisiana, with maximum winds of 150 miles (241 kilometers) per hour, matching a record set in 1856. The hurricane was weakening as it moved north across the state, with top winds dipping to 110 miles per hour as it pushed inland across southwestern Louisiana, according to a statement from the National Hurricane Center.
Laura extends an extremely active Atlantic hurricane season that still has three months to go. It will be the seventh system to hit the U.S., a record for this time of year, and the first major hurricane to hit the Gulf Coast since Michael in 2018.
The storm has prompted mandatory evacuations in coastal areas, and is targeting the heart of America’s energy industry, shutting more than 80% of Gulf oil production and a third of the region’s refining capacity, and scoring a direct hit on plants that produce chemicals and liquefied natural gas. It had more power than Hurricane Harvey had when it made landfall in Texas in 2017.
Hurricane Laura is expected to cost insurance companies as much as $15 billion, with 80% of those losses coming from Louisiana and 20% from Texas, according to Wells Fargo & Co. analysts.
The losses could be a blow to reinsurers, which provide insurance for insurers, serving as backstops while earning premiums that they invest elsewhere.
“It is tough to tell how much exposure the reinsurers will have, as higher Louisiana losses will likely lead to more losses for reinsurers and a more Texas-focused event would result in more losses being retained by primary insurance companies,” analysts led by Elyse Greenspan said in the note to clients Thursday.
That’s because the insurance market in Texas is dominated by national carriers such as State Farm and Travelers, while Louisiana is served by many smaller, regional companies, the analysts said.
Hurricane Laura’s path closely resembles that of Ike in 2008, the Wells Fargo analysts said. That storm -- which also made landfall near the border between Louisiana and Texas -- inflicted wind damage in the Houston area, leading to insured losses of $12.5 billion, or $15 billion in today’s dollars.