Storms shake faith of businesses in New Orleans

By Tim Gaynor

NEW ORLEANS (Reuters) - For New Orleans cafe owner Kappa Horn, the inconvenience of a hurricane like Gustav, which roared through town this week, is shutting down the business and laying off staff.

For art gallery owner Jack Bosma the problem is paying hefty insurance premiums for ever shrinking storm coverage.

Furniture maker George Nakajima says it's not knowing what heartbreak lies around the corner with the next storm to barrel into the low-lying city.

New Orleans is known as "The Big Easy" for its laid-back lifestyle. But after Gustav, which hit while the city was still recovering from Katrina in 2005, residents are seriously wondering if they can afford this roller-coaster ride.

"It's constantly nagging at the back of your head, is it worth it?" said Nakajima, after sitting out Gustav, which came ashore with 100 mph winds.

The emotional toll is enormous, but living at or below sea level in a storm corridor on the Gulf of Mexico also carries a heavy financial risk for big and small businesses.

Katrina's rampage caused more than $80 billion in damage, over half of it borne by private insurers. Preliminary estimates put the cost of Gustav at up to $10 billion.

Many residents returned to New Orleans after Katrina, but the rising cost of doing business could test the resilience of city's economy.

"Trying to find insurance coverage is a huge challenge, especially for windstorms and hurricanes. It has become incredibly expensive," said Richard Bell, risk management director for Loyola University New Orleans.

Businesses in the city say premiums for storm interruption insurance in some cases doubled or even tripled since Katrina.

Homeowners say they pay anywhere from $4,800 to $20,000 each year to insure their homes, while facing increasingly large deductibles for wind damage and the possibility of protracted wrangling to get a payout.

"Life and death is obviously a huge concern when these storms are coming through, but insurance is pretty damn close behind it," art dealer Jack Bosma said.

MANAGING DISRUPTION

Storms don't just fray nerves and ratchet up insurance in this storied Louisiana city, where the key industry, tourism, generates $5 billion a year in revenue.

Ahead of Gustav, hotels and restaurants had to close down and lay off staff just at the start of the autumn convention season -- the busiest time of year.