Based on the estimated insured loss averages released by three major risk modeling firms over the last several days, Hurricane Ike could rank as the third-costliest storm in history, behind only Hurricanes Katrina and Andrew.

Risk Management Solutions (RMS) expects the storm to cause insured losses of between $7 billion and $12 billion. It said that its estimates, based on the latest available damage information, includes both onshore and offshore losses resulting from strong winds and storm surge, but does not include losses from inland flooding or losses covered under flood policies issued by the National Flood Insurance Program.RMS also said that most of this estimated loss is the result of onshore damage from wind and rain across the areas affected by Hurricane Ike. Widespread damage is expected to affect buildings in coastal areas that experienced the highest wind speeds, despite strong modern building codes that are second only to the codes enforced in southern Florida. Losses to high-rise buildings in downtown Houston as a result of roof and window damage may also contribute significantly to the total loss.

“High-rise office buildings in downtown Houston have been subjected to winds around 30 miles per hour higher than at ground level, potentially aggravated by debris from the proximity of these buildings in the downtown area,” said Dr. Christine Ziehmann, director of model management at RMS, in a release. “Damage that has been observed so far to windows and facades is similar to that experienced in southeast Florida from Hurricane Wilma in 2005.” Catastrophe risk modeling firm AIR Worldwide released a narrower estimate, projecting that insured losses to onshore properties in the U.S. from Hurricane Ike would be between $8 billion and $12 billion, with an expected loss of $10 billion. Its estimate contained similar concerns as RMS in regard to building damage.

“As expected, Houston's high-rise buildings are reported to have sustained major damage to glazing, much like the damage caused by 1983's Hurricane Alicia,” said Dr. Peter Dailey, director of atmospheric science at AIR Worldwide, in a release.

AIR said that it expects significant damage to mobile homes and light metal construction, such as warehouses. It also said that ornamental features, such as those found on many fast food restaurants, are likely to have sustained significant damage. The company also estimated that insured losses to off-shore assets in the Gulf of Mexico would fall between $600 million and $1.5 billion.

Lastly, EQECAT placed its estimated insured onshore losses from Hurricane Ike between $8 billion and $18 billion, primarily in the Texas counties of Brazoria, Harris, Galveston, Chambers, and Jefferson. They said that their estimate is based upon initial observations of Hurricane Ike's wind, wave, and flood patterns.

Beyond wind damage to commercial, industrial, and residential fixed structures — such as office buildings, factories, warehouses, and homes — EQECAT's insured loss estimates include business interruption, as a result of the destruction of property, and demand surge, which occurs when the demand for products and services to repair damage significantly exceeds the regional supply. Thus, these products and services may have to be brought to the region quickly from distant points, resulting in additional costs for transportation, packaging, and manufacturing.

Excluded from EQECAT's insured loss estimates are losses related to flooding, private and commercial automobiles and similar vehicles.

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Special Reports /

Modeling Firms Release Initial Ike Estimates

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