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Hurricane Irene Could Cause $1 Billion In Insured Losses to Connecticut

Source: Hartford Courant

Posted on 26 Aug 2011

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If Hurricane Irene stays on track, it could hit Connecticut with as much as $1 billion in insured losses, only a fraction of the total economic losses that the state might suffer from the storm, according to a catastrophe-modeling company.

"If you use the official forecast track, you're looking at maybe $500 million to $1 billion in losses in Connecticut," said Chuck Watson, director of research and development for Kinetic Analysis Corp. of Silver Spring, Md.

"That's forecast to make a landfall at mid-to-high Cat 1 -- Category 1 winds -- almost right on New London is the current forecast track," said Watson, who works in a Savannah, Ga., office. Category 1 winds are 74 mph to 94 mph.

Irene isn't expected to make landfall until late Sunday. There's a lot of time between now and then for the storm to veer east or west of its forecasted track. If the eye of the storm hits Rhode Island instead of Connecticut, the potential insured losses could be less than $100 million, Watson said.

Irene had about a 20 percent chance of landing in Connecticut as of Wednesday, as opposed to spinning off into the Atlantic, Watson said. The storm has about a 10 percent chance of causing $1 billion or more in damage to insured property, he said.

Other companies that model catastrophes for insurance companies, such as RMS and AIR Worldwide, have not yet offered estimates of the storm's potential damage. Both companies said they would probably have estimates after the hurricane hits land.
RMS pointed out in its most recent note, issued Tuesday, that the National Hurricane Center had changed its extended forecast considerably for Irene.

The forecasted landfall location shifted more than 300 miles east, which is a reflection of high uncertainty in extended forecasts, RMS said in its note.

If Irene made landfall in Connecticut, it would be the first hurricane to do so in 20 years. Hurricane Bob crashed into the state on Aug. 19, 1991. The last tropical storm to make landfall in Connecticut was Floyd on Sept. 16, 1999. The hurricane season, from June 1 to Nov. 30, peaks from mid-August to mid-October.

Insured losses are the amounts that property-casualty companies pay to reimburse customers for destroyed homes, cars and other property. Property-casualty insurers have already paid huge sums for damage from tornadoes and winter storms this year. A costly hurricane season would pile on expenses for insurers that are equipped to pay, but have taken a blow to profits this year because of natural disasters.

For example, in the three-month period from April to June, The Hartford Financial Services Group had a 68 percent drop in net income; The Travelers Cos. had a second-quarter net loss of $364 million; and Allstate Corp. had a loss of $620 million -- the worst quarter for catastrophe claims for Allstate since Hurricane Katrina in 2005.

A direct hit to Connecticut would be a one-two punch, hitting local property owners and the insurance companies that employ thousands in the state. But our neighbors would have it worse.

"Rhode Island would get the brunt of it," Watson said, estimating insured losses for the Ocean State at as much as $1.9 billion. "In that case, the surge would go right up ... Narragansett Bay. That would put a wall of 10 or 12 feet of water right up the bay."