Hurricane Gustav may trigger insurance claims as high as 10 billion U.S. dollars after lashing Louisiana, according to firms that specialize in catastrophe estimates, making it potentially the fourth-highest total for a U.S. storm.
The hurricane lost power as it headed for shore, on Monday, keeping insured losses on land between 3 billion dollars and 7 billion dollars and oil-drilling damage at 1 billion dollars to 3 billion dollars, according to estimates from Newark, California-based Risk Management Solutions Inc. That's less than Katrina's record 41.1 billion dollars in 2005.
Gustav is the first test since 2005 of the industry's efforts to reduce losses in catastrophe-prone regions.
Allstate Corp and State Farm Mutual Automobile Insurance Co were among insurers that turned away new policyholders in states along the Gulf of Mexico and East Coast after hurricanes including Katrina, Rita and Wilma caused $61.9 billion in claims.
"This is not a Katrina-sized event," said Claire Souch, director of model management for RMS. "The impact will be in the single-digit billions rather than the tens of billions we saw with Katrina."
Gustav weakened to a Category 2 storm by the time it reached land at about 10 am local time southwest of New Orleans, which was evacuated in advance of the storm. Gustav's winds were close to 110 miles (177 kilometers) per hour as it came ashore and slowed to about 80 miles per hour as of 4 pm yesterday, local time.
Tom Larson, a senior vice- president with Eqecat Inc, a risk-modeling firm in Oakland, California, said insured losses may be 6 billion dollars to 10 billion dollars, primarily in New Orleans and the surrounding area. Larson's data didn't include offshore damage.
AIR Worldwide Corp, a Boston-based risk modeler, said damage on land will be about 3 billion dollars, with a range of 2 billion dollars to 4.5 billion dollars.
Even at the low end of the AIR estimate, Gustav would rank among the 12 costliest US hurricanes for damage on land. If the total reaches the top of the Eqecat estimate, Gustav will surpass all U.S. hurricanes for damage on land except for Katrina, Wilma and Andrew. The latter cost 15.5 billion dollars when it struck Florida and Louisiana in 1992, according to Insurance Services Office Inc in Jersey City, New Jersey.
Gustav may have caused 1 billion dollars to 2 billion dollars in insured damage offshore, said Steve Smith, an atmospheric physicist with Carvill Group, a reinsurance brokerage. AIR said offshore claims may run from 1.8 billion dollars to 4.4 billion dollars.
"The area it hit has a good population of rigs," Smith said. "It wasn't too bad for the Gulf oil field."
Hurricane Dolly, the first Gulf of Mexico hurricane of the season, cost insurers less than 750 million dollars when it struck southern Texas in July, RMS estimated.
Insurers of oil platforms in the Gulf of Mexico have joined companies selling property coverage on land in attempts to limit losses. American International Group Inc, Zurich Financial Services Group AG and Liberty Mutual Group Inc were among insurers that raised prices fivefold and capped how much they'll insure after Katrina and Rita caused record offshore claims estimated at 8 billion dollars in 2005.
(China Daily September 3, 2008)