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Katrina Damage May Bring $26B in Claims

Katrina Damage May Bring $26B in Claims
Tuesday August 30, 7:13 am ET
By Eileen Alt Powell, AP Business Writer
Early Estimates Put Hurricane Katrina Damage at Up to $26 Billion in Insurance Claims

NEW YORK (AP) -- The property and casualty insurance industry, hit hard last year when four separate hurricanes slammed into Florida, now faces as much as $26 billion in claims from Hurricane Katrina's foray into Louisiana and neighboring Gulf Coast states, according to preliminary risk assessments.

AIR Worldwide Corp., a risk modeling firm based in Boston, said late Monday that insured losses could range from $12 billion to $26 billion.

At the high end, that would make Katrina more expensive than the previous record-setting storm, Hurricane Andrew, which caused some $21 billion in insured losses in 1992 to property in Florida and along the Gulf Coast.

Germany's Munich Re, the world's biggest reinsurance company, on Tuesday put its initial estimate for total insured damage at between $15 billion and $20 billion and its own exposure at up to $489 million, but said that figure could change as more information emerges.

Another risk modeling firm, Eqecat Inc., which is based in Oakland, Calif., initially estimated damages from Katrina at up to $30 billion, but it lowered its projections twice after the storm struck east of populous New Orleans and was quickly downgraded as it moved inland from a Category 4 hurricane to a Category 2 storm.

Late Monday, Eqecat's estimate for damage to homes, businesses, autos and trucks was a range could of $9 billion to $16 billion.

Eqecat spokesman Thomas Larsen said the storm's move eastward reduced some of the potential for losses in the New Orleans area. At the same time, he said, "it has raised concerns about Biloxi and Gulfport," both in Mississippi, as well as other Gulf Coast cities to the east.

The estimates, which Larsen emphasized were preliminary, do not include possible damage to oil drilling platforms and other oil operations in the Gulf, which produces and refines a significant amount of U.S. fuel.

Larsen noted that Hurricane Ivan last September caused serious damage to some oil rigs and added: "Katrina is to the west of Hurricane Ivan's path, in an area more densely populated with oil platforms."

There were no immediate estimates of damage to oil operations, although Royal Dutch Shell PLC said on its Web site that two of its drilling rigs equipped with tracking devices had "drifted off location."

AIR Worldwide attributed its higher estimate to Katrina's size, noting that "hurricane-strength winds extended more than 120 miles from the center of the storm and tropical storm-strength winds extended as much as 230 miles from the center."

Last year, the four separate hurricanes that slammed Florida and other East Coast states cost insurers nearly $23 billion. The most devastating, Hurricane Charley, racked up insured losses of $7.5 billion last August.

Major insurance companies -- already dealing with the fallout from Katrina in southern Florida, where the storm passed late last week -- on Monday began turning their attention to Louisiana and Mississippi.

The largest property and casualty insurance companies operating in the southern states are State Farm Insurance Cos. of Bloomington, Ill., and Allstate Corp. of Northbrook, Ill.

Phil Supple, spokesman for State Farm, said the company has teams ready to move into New Orleans and Gulf Coast cities after Katrina passes to begin processing insurance claims.

"We have to wait for civil authorities to open areas so we can get in and assess damages," Supple said.

Allstate, the No. 2 home insurer in those states, also has teams prepared to move in after the storm. Spokesman Mike Trevino said the company has mobile units fitted with generators and satellite dishes so they can deal with claims in hard-hit areas where electricity and phone service isn't available.

"At this early stage, our advice to everyone is to stay safe," Trevino said. "And once people are able to get back into the area, they need to be very careful about going into homes, especially if there appears to be structural damage."

Robert Hartwig, chief economist with the Insurance Information Institute in New York, said that "what we're looking at is one of the top two or three most expensive storms in U.S. history." The III is a research center supported by property and casualty insurers that provides information about home, auto and other insurance products to the public.

He said damage from Katrina was harder to project than that of earlier hurricanes because New Orleans has a significant number of businesses, such as tourist hotels and restaurants, that could suffer both physical damage as well as so-called business interruption losses.

Hartwig said that in the four hurricanes that hit Florida last year, one-third of the insured losses were for commercial properties that suffered physical damage or were shut down for an extended period for repair.

http://www.air-worldwide.com

http://www.eqecat.com

http://www.statefarm.com

http://www.allstate.com

http://www.iii.org


LINK: http://biz.yahoo.com/ap/050830/katrina_insurance.html?.v=4