Katrina may cost insurers $25 bln
(Reuters)
Updated: 2005-08-29 21:48

Hurricane Katrina may cost insurers as much as $25 billion, which would make the hurricane the most expensive to hit the United States, a storm modeler said.

Eqecat Inc. of Oakland, California had on Sunday forecast that losses could top $30 billion but reduced it because the storm weakened slightly and tracked farther east than forecast, a spokesman for the company said. The firm now expects minimum insured losses of $12.5 billion.

A $25 billion payout would make Katrina more expensive than Hurricane Andrew, the costliest U.S. hurricane ever, according to the Insurance Information Institute. It often takes days or weeks after a major storm to assess damage.

Shares of some insurers fell on Monday, as did shares of some reinsurers, which provide insurance for insurers.

In premarket trading on Inet, shares of Allstate Corp. (NYSE:ALL - news) fell 1.8 percent, American International Group Inc. (NYSE:AIG - news) 2.5 percent and St. Paul Travelers Cos. (NYSE:STA - news) 4.1 percent. In Europe, Munich Re (MUVGn.DE) shares fell 1.2 percent and Swiss Re (RUKN.VX) fell 1.2 percent.

Katrina made landfall at 7:10 a.m. EDT in southern Plaquemines parish in Louisiana, about 65 miles south-southeast of New Orleans, as a Category 4 storm, with maximum sustained winds at 140 miles per hour, according to the National Hurricane Center.

Ray Stone, vice president of catastrophe operations at St. Paul, said the storm remains "big and dangerous," though it has weakened slightly and kept New Orleans on the weak side of the storm.

Still, he said "There is great concern that the levees in New Orleans will be topped, and there could be considerable flooding." He said it would likely be Wednesday at the earliest before St. Paul could assess losses.

Andrew resulted in about $20.9 billion of claims, after adjusted for inflation, when it plowed through southern Florida in 1992. Insurers last year paid out $22.8 billion for four Florida hurricanes, the insurance institute said.

Andrew came ashore as a Category 5 storm, the most serious on the Saffir-Simpson scale.

LOSS ESTIMATES

According to Risk Management Solutions, a Newark, California-based risk forecaster, insured property in New Orleans and the seven surrounding parishes totals more than $110 billion.

Bill Mellander, a spokesman for Northbrook, Illinois-based Allstate, said it's too soon to estimate losses, but the largest publicly traded U.S. auto and home insurer is deploying claims adjusters near where it expects the worst damage.

Losses from the four Florida hurricanes nearly wiped out Allstate's third-quarter earnings last year.

Hartford Financial Services Group Inc. (NYSE:HIG - news) said its catastrophe claim team is ready to move into areas to begin processing claims. Spokeswoman Victoria Gallant said it may take a week before Hartford can start assessing damage.

State Farm Mutual Automobile Insurance Co., the largest U.S. auto and home insurer, and AIG did not immediately return calls seeking comment.

State Farm is the largest insurer of homes in Louisiana, followed by Allstate, AIG, the Louisiana Farm Bureau Mutual Insurance Co. and St. Paul, the Insurance Information Institute said.

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