Best’s Commentary: Hurricane Delta Tests Gulf Coast Communities, Insurers

OLDWICK, N.J.--(BUSINESS WIRE)--AM Best believes Hurricane Delta represents a uniquely dangerous situation, as areas likely to be hit are the same regions hit by late August’s Hurricane Laura, and so large amounts of flying debris from previously damaged structures could threaten remaining structures and people.

A new Best’s Commentary, “Hurricane Delta Tests Gulf Coast Communities, Insurers,” notes that Hurricane Delta is expected to produce 5 to 10 inches of rain in southwestern and central Louisiana, with maximum isolated totals of 15 inches in low-lying areas. In comparison, Hurricane Katrina in 2005 produced 8 to 10 inches of rain, but the resulting floods were catastrophic. With the electrical power grid in Louisiana already severely damaged by Hurricane Laura, additional damage from Hurricane Delta will likely slow the recovery process even more.

Like Hurricane Laura, Hurricane Delta compares closely with 2005’s Hurricane Rita, which resulted in $6.4 billion in insured losses, given the expected U.S. landfall location. While Hurricane Laura’s loss totals were tempered by the storm missing the metropolitan areas hit by 2005’s Hurricane Rita, insured loss totals for Hurricane Laura will still be considerable. The subsequent insured loss totals from Hurricane Delta are likely to be limited somewhat because of damage already attributable to Hurricane Laura.

AM Best expects total losses from Hurricane Delta, like those from Hurricane Laura, to be within established catastrophe reinsurance program limits for the majority of the entities it rates, particularly since favorable reinsurance market conditions have helped strengthen these entities’ reinsurance programs through the purchase of more robust vertical and horizontal limits with relatively low retention. Although the capital position of smaller companies is more at risk, prudent retention levels should result in losses with more of an impact on earnings than on capital.

To access the full copy of this commentary, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=301947.

AM Best previously commented on Hurricane Delta’s landfall in Mexico. To see the commentary, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=301855.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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