Gustav Damages Manageable But Insurers Show Restraint

This year’s anticipated tumultuous storm season so far has damages by Hurricane Gustav expected to cause significant claims but far less than the $40 billion (US) incurred by its catastrophic predecessor three years ago, Hurricane Katrina.


“This is a significant catastrophic event,” Robert Hartwig, president of the Insurance Information Institute, says, adding that “Gustav will be manageable from a financial perspective.”


As Gustav hit New Orleans as a category 2 storm rather than its’ forecast category 4 force, levees were breached and wind damage was evident.


But some insurers, including Allstate Corp. and State Farm Mutual Automobile Insurance Co., have declined to issue new policies in vulnerable regions near the Gulf of Mexico and East Coast.


EQECAT Inc., which models catastrophic risk, estimates insurance losses in Gustav’s wake will ring in between $6 billion and $10 billion in Louisiana, while Risk Management Solutions (RMS) pegged losses at between $4 billion and $10 billion.


Damages to thousands of oil and gas platforms in the gulf could broach an additional $3 billion, RMS estimates. Some oil and gas platform insurers have implemented price increases and instituted caps following claims of nearly $8 billion this season.


In Florida, insurers are in the midst of mopping up after Tropical Storm Fay’s persistent rains left mass flooding along the state’s East Coast the week prior.


The season is not yet over, with more hurricane-force storms anticipated before the officially subsiding by Nov. 1.

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