Posted on 29 Aug 2011
According to Kinetic Analysis Corp., a firm that predicts the effects of disasters, hurricane Irene’s estimated cost to insurers is $3 billion in the U.S. as the storm weakened on its path toward New England. That compares with a projection last week from the Silver Spring, Maryland-based company of as much as $14 billion. Total economic losses, including those that aren’t insured, may be about $7 billion.
“Insurers may get off pretty easy,” Charles Watson, Kinetic’s research and development director, said today in a phone interview with Bloomberg from Savannah, Georgia. “This one’s not the straw that broke the camel’s back.”
Estimates of losses declined as Irene weakened from a hurricane to a tropical storm. Insurers may face losses of $200 million to $400 million in North and South Carolina, according to risk-modeling firm Eqecat. That’s less than the $1.4 billion in insured losses North Carolina sustained from Hurricane Floyd in 1999, one of the costliest storms to hit that state, according to the Insurance Information Institute.
“The first initial estimates were that the storm was going to be a lot more severe,” Tom Larsen, senior vice president at Oakland, California-based Eqecat, said in a phone interview. “Sometimes they look big and they’re not, and sometimes they blow up really quickly and become a major loss.”
Eqecat and other modeling firms have yet to release estimates for mid-Atlantic states, New York and New England. Losses in those regions could create volatility in the projections, Larsen said.
Irene struck New York City today as a tropical storm, with winds of 65 miles (105 kilometers) per hour, after knocking out power on Long Island and causing flooding in New Jersey. The storm left more than 1 million homes and businesses in the Carolinas and Maryland without electricity, according to local utilities. At least 11 people died.
Insurers have faced losses this year from catastrophes including an earthquake in Japan, a tropical cyclone in Australia and U.S. tornadoes. Natural disasters erased second-quarter profit at Allstate Corp. and Travelers Cos. and cut into earnings at other insurers, including Chubb Corp.
Data on insured losses understate actual damage because the figures don’t include uninsured property or destruction caused by actions excluded from some policies, such as residential flooding.