Insurers May Pay $6B in Claims For Hurricane Rita
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Insurers including Allstate and St. Paul Travelers may pay $2.5 billion to $6 billion in claims from Hurricane Rita, a fraction of what Hurricane Katrina probably cost.
Estimates are low for a storm of Rita’s strength because it came ashore over Louisiana’s sparsely populated western coast, two storm modelers said. Eqecat projected $3 billion to $6 billion, and AIR Worldwide estimated $2.5 billion to $5 billion.
At $6 billion, Rita would cost as little as a third of what some analysts had expected. Katrina may cost as much as $40 billion to $60 billion, making it the most expensive disaster in the industry’s history. Charley and Ivan, two of the record four hurricanes to hit Florida last year, each cost insurers more than $7 billion.
“This does not add a great deal of pressure to insurance markets,” said Bob Hartwig, chief economist of the Insurance Information Institute, an industry group in New York. Insurers “had already taken it on the chin with Katrina.”
With winds of 120 mph, Rita made landfall near the Louisiana-Texas border as a Category 3 hurricane on the Saffir-Simpson scale on Saturday. It had been the maximum Category 5 three days ago. The storm’s turn north September 23 over the Gulf of Mexico changed a projected course that may have been devastating for Houston’s oil-refining hub.
“It appears that most of the refineries weathered the storm,” the president of Houston consultant Lipow Oil Associates, Andy Lipow, said. “I would say start-ups are imminent.”
Oakland, Calif.-based Eqecat estimated $9 billion to $18 billion of claims when Rita was still in the Gulf, assuming it would be stronger at landfall and sweep over more densely populated areas.
State Farm Mutual Automobile Insurance, owned by its policyholders, is the biggest insurer of homes in Texas.