September 27, 2021

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Ida’s Hammering of Mid-Atlantic States May Have Insurers Reassessing Region

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California and Florida have long been seen as risky areas for insurers because of earthquakes, wildfires and storms. In the wake of hurricanes Ida and Henri, parts of the Mid-Atlantic region may be added to the list.

Insurers “pulled away from some areas and then they focused on the tristate” region of New York, New Jersey and Connecticut, said Matthew Palazola, senior property and casualty insurance analyst at Bloomberg Intelligence. “Now with these two massive rain events one after the other, maybe they do kind of re-evaluate.”

Remnants of Hurricane Ida hammered New York and neighboring states this week, bringing as much as 8 inches of rain in a few hours and killing at least 41 people. Transit ground to a halt as water flooded the New York City subway system and played havoc with commuter rail services in the region. Tornadoes hit Maryland and New Jersey.

The flooding came only days after Hurricane Henri doused the city with a record amount of rain. The back-to-back events raise concern that disastrous weather could become commonplace.

Insurers have a number of levers to pull when risks become too much to bear. They can tighten underwriting, or secure reinsurance that will help them shoulder the burden of costs. At the far end of the spectrum is opting to cut their losses and not renew policies in disaster-prone regions.

“It’s a constant re-evaluation,” said Rob Gall, U.S. chief property claims officer at Marsh McLennan. “You’ve seen a lot of retrenching and a lot of our insurers have really looked very closely at their catastrophe-exposed books of business and through underwriting have addressed a lot of that.”

That’s the route some underwriters have opted to take in California, which has been beset by wildfires super-charged by climate change. A California Department of Insurance report from October showed that the number of homeowner policies insurers declined to renew rose 31% in 2019 to 235,250 from 179,458 in 2018.

Meanwhile, differences in market share across regions offers a sense of how insurers have rebalanced risk. Allstate Corp. holds at least 10% of the market for homeowners insurance in New York, New Jersey, and Connecticut compared with a less than 4% stake of that business in Louisiana, according to Bloomberg Intelligence research.

Palazola said third-quarter results for insurers, which will include Ida’s impact, could provide an early sense of what their strategy will be in the U.S. Northeast.

Increased costs brought on by insurers pulling back could be offset by new sorts of products rolled out to address growing needs linked to climate risk.

“We’ll see sort of twin forces: increased supply, increased innovation and choice around risk-transfer issuances, so that will be good for consumers,” said Rowan Douglas, head of insurance broker Willis Towers Watson’s Climate and Resilience Hub. “On the other hand of course, as risk increases in particular areas, that’s going to put an upward pressure potentially on pricing.”

Photo: Kayakers paddle down a portion of Interstate 676 after flooding from heavy rains from hurricane Ida in Philadelphia, Pennsylvania on September 2, 2021 Photographer: Branden Eastwood/AFP/Getty Images

Topics Carriers

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