Posted on 30 Aug 2012 by Neilson
Hurricane Isaac, the slow-moving storm pounding the Gulf Coast, will cause insured losses of up to $1.5 billion onshore, according to disaster-modeling company Eqecat.
The firm, whose estimates are tracked by the insurance industry, is estimating that property-casualty companies will be on the hook for between $500 million and $1.5 billion in claims from the category-one hurricane, according to Tom Larsen, a senior vice president at Eqecat.
The loss is a modest one relative to past storms that have struck the Gulf Coast, especially when compared with Hurricane Katrina, whose $41.1 billion price tag remains the largest insured loss in U.S. history.
A closer comparison is Hurricane Gustav, which struck in 2008, said Mr. Larsen. But that storm, a category two, packed more of a punch. A widely cited industry estimate set insured losses from Gustav at around $2 billion.
The massive destruction that Katrina delivered on New Orleans prompted a major effort to increase the city's flood defenses, and Gustav and last year's Tropical Storm Lee downed trees that otherwise now would be threatening power lines.
"This is New Orleans at its strongest," said Mr. Larsen. The loss estimate won't be a "striking hit" to large insurers, but will have a greater impact on the balance sheets of regional companies, he said.
But Mr. Larsen and others warned that Isaac will continue to cause havoc in the hours and days ahead. The storm's slow pace means it is delivering hours of sustained winds, its size means its effects are being felt far down the Gulf Coast, and its progress will take it over areas that will be subject to severe flooding.
"The focus of the media is on New Orleans right now, and rightfully so, because of what happened in Katrina, but Alabama and Mississippi are getting pounded right now," said Dave Crowe, global head of commercial property claims for Chartis, the property-casualty arm of American International Group Inc. (AIG). "There is significant rain and wind there. The path is going to continue to move slowly inland, so inland flooding is going to be a problem in the days to come."
Inland drought conditions may mean that top soil isn't able to absorb the rains quickly, which could lead to flash floods, Mr. Crowe warned. But countering that threat is the low levels of rivers and reservoirs, which therefore have plenty of capacity, said Mr. Larsen.
Eqecat's estimate includes claims made by homeowners, commercial property coverage, and business-interruption costs. It includes onshore energy production, but not insured losses to offshore assets.
Mr. Larsen predicted total economic losses offshore will be between $500 million and $1 billion, but he said it was difficult to predict how much of that figure will be insured, since the offshore energy insurance market is not transparent.
The Eqecat estimate also excludes claims that will be paid by the federal government's National Flood Insurance Program.