Katrina May Cost Insurers $25B
NEW YORK – Hurricane Katrina (search) may be the most expensive hurricane ever to hit the United States, costing insurers as much as $25 billion.
Eqecat Inc. (search) of Oakland, Calif., had on Sunday forecast that losses could top $30 billion, but it reduced that forecast because the storm weakened and veered slightly east. The firm expects minimum insured losses of $12 billion.
• Click here to track Hurricane Katrina
A $25 billion payout would make Katrina more expensive than Hurricane Andrew (search), 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, and several insurers on Monday said it's too soon to estimate losses.
Shares of many insurers fell on Monday, as did shares of some reinsurers, which provide insurance for insurers.
In New York, Allstate Corp. (ALL) fell 55 cents, or 0.9 percent, to $57.40; American International Group Inc. (AIG) fell 90 cents, or 1.5 percent, to $58.37; Hartford Financial Services Group Inc. (HIG) fell $1.25, or 1.7 percent, to $73.46; and St. Paul Travelers Cos. (STA) fell $1.64, or 3.7 percent, to $43.10.
In Europe, Munich Re shares fell 1.3 percent and Swiss Re fell 1.3 percent.
Katrina made landfall at 7:10 a.m. EDT 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 winds have fallen slightly and New Orleans is on the storm's weak side.
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 (search). Katrina was also a Category 5 storm before it came ashore.
According to Risk Management Solutions (search), a Newark, Calif.-based risk forecaster, insured property in New Orleans and the seven surrounding parishes totals more than $110 billion.
State Farm Mutual Automobile Insurance Co. 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.
State Farm, the Mississippi Farm Bureau Mutual Insurance Co. and Allstate are the biggest in neighboring Mississippi.
Bill Mellander, a spokesman for Northbrook, Ill.-based Allstate, said 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. claims adjusters are preparing to move into affected areas to begin processing claims. Spokeswoman Victoria Gallant said it may take a week before Hartford can start assessing damage.
State Farm and AIG did not immediately return calls seeking comment.