The Rising Star Newsletter
Even after a record breaking hurricane season in 2020, Ida's rapid intensification from a tropical storm to a 150-mph category 4 hurricane in a matter of days stunned everyone. By landfall on August 29, 2020, Ida became the second most damaging and intense hurricane to strike Louisiana. We initially projected $180 million of ultimate incurred gross losses including allocated loss adjustment expenses but our carefully planned reinsurance protection significantly reduced the overall net loss to our company to $3.2 million.
We based the initial estimate on several factors, including a full review of the specific portfolio results from multiple hurricane modeling firms. Notably, we license the Karen Clark & Company (KCC) model in-house for the perils of US hurricane and storm surge (including Hawaii), severe convective storm, and earthquake. Our utilization of the KCC model to estimate probable maximum losses and for risk management resulted in the decision to purchase additional coverage that was specific to the state of Louisiana for the 2021 hurricane season.
Ida is estimated as a 1-in-19 year event for our non-Hawaii portfolio and a 1-in-84 year event for our standalone Louisiana portfolio as modeled by KCC. This is a much lower return period than suggested by other hurricane models and provides significant insight into our purchase of specific additional coverage for Louisiana.
Rick Espino, Centauri’s President and CEO, stated “significant thought and energy goes into the amount of protection the Company purchases each year. Utilizing multiple models to assess and address our greatest exposures at the most granular level is fundamental to what we do. We manage our exposures based on worst case outcomes, actuarially driving confidence levels up where we feel they are needed. Much appreciation goes to our actuarial and risk management teams that work hard every day to make sure we’re prepared to support our customers through any catastrophic event.”
Rick also added, “Centauri’s catastrophe excess of loss reinsurance program covering Louisiana has first event per occurrence limit substantially higher than our estimated ultimate loss. Depending on the ultimate scale of Hurricane Ida loss, which we estimate to be around $180 million, Centauri would therefore be less than halfway through our available limit.”
This conservative approach to risk management has left us with significant reinsurance coverage remaining, as only a portion of our reinsurance protection for a single occurrence has been utilized. We are committed to disciplined risk management while ensuring our policyholders can weather any storm.