Gustav seen less costly than Katrina for insurers
NEW YORK (Reuters) - Hurricane Gustav, which came ashore southwest of New Orleans on Monday morning, is expected to trigger significant insurance claims but far less than record-setting Katrina did three years ago.
"This is a significant, catastrophic event, but insurers anticipate these, and Gustav will be manageable from a financial perspective," said Robert Hartwig, president of the Insurance Information Institute, an industry-funded nonprofit organization in New York.
Gustav, a dangerous Category 4 hurricane a few days ago, hit shore near Cocodrie, Louisiana, about 70 miles southwest of New Orleans late on Monday morning, as a Category 2 storm on the five-step Saffir-Simpson scale of hurricane intensity, one step below Katrina's strength when it made landfall.
EQECAT Inc, which helps insurers model catastrophe risk, said it estimated insurance losses from Hurricane Gustav, after it made landfall, will range from $6 billion to $10 billion, primarily in Louisiana.
Risk Management Solutions (RMS) put insured losses at $4 billion to $10 billion, saying losses for residential and commercial properties are estimated at $3 billion to $7 billion, excluding coverage from a government flood insurance program.
Damage to oil platforms and wells, as well as production outages, will range from $1 billion to $3 billion, RMS said late on Monday. Offshore damage was not as extensive as originally anticipated, said the group, which provides risk models to insurers and other financial institutions.
RMS said the maximum significant wave height recorded for Katrina was 55 feet in the Gulf, the highest ever recorded, while the height of waves from Hurricane Gustav had been 30 feet.
Damage from Katrina to the port city of New Orleans and along the Gulf Coast, including parts of Louisiana, Mississippi and Alabama, triggered insurance claims in excess of $40 billion in 2005.
While New Orleans was buffeted by strong winds on Monday, there were no immediate reports of breaches of the barriers that gave way three years ago, flooding 80 percent of the city and stranding thousands of people.
Since 2005, Louisiana Citizens Property Insurance Corp, a state-funded carrier, has stepped in to provide significant coverage, decreasing exposure for the industry.
A significant portion of insurance losses from Katrina stemmed from business interruption claims because it took weeks, even months, for some to reopen for business after the devastation.
"I expect these losses to be very small compared to 2005," Hartwig said.
Among commercial insurers, American International Group Inc, Travelers Group, Louisiana Workers' Compensation Corp, a mutual insurer, and Zurich Financial Services Group are the largest providers, writing about one-third of total coverage, according to figures compiled by ratings agency A.M. Best & Co.
Among private providers of homeowners insurance, State Farm Group, a large mutual insurer, and Allstate Corp together provide nearly half of the coverage in Louisiana.
Damage to offshore oil and gas rigs in the Gulf of Mexico is also likely to be less than in 2005, when Katrina, and several weeks later, Hurricane Rita, caused a total of $5 billion in energy company insurance claims.
(Editing by John Picinich and Jan Paschal)
