As Hurricane Katrina bore down on the U.S. Gulf Coast this week, generating lethal 175 mile-per-hour winds and threatening to destroy everything in its path, American insurance companies feared they would take an economic beating. As it turns out, however, they were spared the worst of predictions.
Still, according to Bloomberg News, insurers like American International Group Inc., or AIG, will likely face some $16 billion in claims, making Katrina the second-most expensive storm in U.S. history.
“As bad as it is, it was looking a lot worse,” Tom Larsen, a senior vice president at Eqecat Inc., told Bloomberg. His firm estimated the total claims at between $9 billion and $16 billion.
Initially storm watchers at the National Weather Service and other agencies believed Katrina would pound on New Orleans, home to about $150 billion in insured property. But as she approached land, Katrina’s winds died down to just over 100 miles per hour, and she veered east, away from the historic Gulf Coast city.
According to reports, Hurricane Andrew – which pummeled southeastern Florida in 1992 – triggered $20.5 billion worth of claims, Bloomberg reported.
And last year, a total of four tropical storms – a nightmare year for U.S. residents in the southeast – cost insurers nearly $23 billion, says the Insurance Services Office Inc.
AIG, the world’s largest insurer, could lose about $500 million before taxes as a result of Katrina, Andrew Kligerman, an analyst at UBS Securities LLC in New York, told the financial wire service.
Kligerman added Hartford Financial Group Inc., which sells primarily property insurance, could face $150 million in losses.
“We will start assessing damages immediately, but it may be as long as a week before we are allowed access into some of the worst areas,” Joe Loparco, a spokesman for Hartford, Connecticut-based Hartford, told Bloomberg.
The Jan. 17, 1994, earthquake in Northridge, Calif., which struck the San Fernando Valley and was centered about 23 miles west-northwest of Los Angeles, cost insurers about $16 billion, while the Sept. 11, 2001, terrorist attacks came in at about $20.1 billion.
Besides stripping power from 2.3 million residents across the Gulf Coast states, Katrina damaged scores of homes, offices and businesses, stripped a portion of the roof off the Louisiana Superdome, downed trees, destroyed automobiles and trapped residents on top of buildings as several low-lying areas were flooded.