Early Isaac losses muted compared with other storms

Wed Aug 29, 2012 4:13pm EDT

(Reuters) - Hurricane Isaac has caused up to $1 billion in economic losses for offshore energy properties and up to $1.5 billion in insured losses onshore in Louisiana and neighboring states, disaster modeler Eqecat said on Wednesday.

While the estimates are early and likely to rise, they suggest that Isaac, now downgraded to a tropical storm, will ultimately be a much less damaging storm than 2005's Hurricane Katrina, a larger and more powerful cyclone that hit the same region.

A fuller loss picture was expected later on Wednesday and into early Thursday as Isaac passes over New Orleans and Baton Rouge, Louisiana. Scientists warned there was still plenty of room for more damage to develop.

"The storm is not even over, the storm has not moved away from Louisiana yet, we haven't seen all it's going to dish up," said Michael Kistler, a director at RMS, another of the major disaster modeling firms.

Shares in major insurers were little moved in midday trading, as analysts and ratings agencies said it appeared Isaac would have little to no impact on the industry.

Eqecat, like RMS a modeler whose software is used by the insurance industry, said the offshore losses were in the range of $500 million to $1 billion. Those are economic losses, however, which are as a rule higher than insured losses. The insured figure is due later on Wednesday.

Onshore, where insured estimates are already available, losses are in a range of $500 million to $1.5 billion, the firm said. That estimate covers property losses and business interruption policies as well as energy production.

If the early trends hold, Isaac would not crack the top-10 list of worst hurricanes by inflation-adjusted losses. Last year's Hurricane Irene, which is 10th on that list, caused about $4.3 billion in losses.

Eqecat peer AIR Worldwide is expected to release its own loss estimate in the next day or so. The two firms often differ in their estimates.

"Because it slowed down and kind of stalled, the winds and the rain impacting New Orleans are going to last a lot longer than they would have had the storm just progressed inland," AIR principal scientist Tim Doggett said of Isaac in an interview. "That's going to impact our losses that we'll see."

SURGE DAMAGE

Some coastal areas have seen more than 10 feet of storm surge from Isaac -- the water that a tropical cyclone pushes forward as it comes on land -- according to the latest National Hurricane Center estimates. Storm surge caused more than $21 billion in losses when Katrina hit seven years ago to the day.

Even well inland, as far north as Indiana by some projections, heavy rains are likely in coming days. The rains will be too late to save crops that may have experienced $20 billion in insured damage from a punishing drought.

Along the Gulf Coast, the most exposed insurers include State Farm, Allstate Corp and Southern Farm Bureau on the residential side, and Travelers, Zurich and CNA on the commercial side.

After last year's record-breaking losses from severe tornadoes, those insurers and their peers have had a much quieter 2012, leaving them better prepared financially for this year's hurricane season.

A spokeswoman for State Farm, which has more than 21 percent of all auto and homeowners' policies in Louisiana, Alabama and Mississippi, said the insurer had teams in place to begin the claims process but that it was too early for any hard data on claim volumes.

European reinsurers, which would suffer some of the biggest losses in a major natural disaster, were reacting calmly to Isaac thus far. Reinsurers Munich Re and Hannover Re said it was too early to estimate possible damage.

"We are relaxed about it," said one reinsurance source, who asked not to be named.

(Reporting by Ben Berkowitz in Boston; Editing by Vicki Allen and Peter Cooney)