Catastrophe modeler AIR Worldwide says onshore insured lossesfrom Hurricane Isaac could reach $2 billion.

The storm is now well-inland and has been downgraded to atropical depression with winds of 35 mph as its rain begins to sopArkansas and Missouri before the storm turns east.

AIR says the estimate of between $700 million and $2 billionincludes insured losses from damage to residential, auto,commercial and industrial properties and contents, as well asadditional living expenses and business interruption-relatedlosses. It also takes into account demand surge.

Competitor Eqecat previously released an insured-loss estimateof between $500 million and $1.5 billion onshore. It adds estimatedeconomic losses of between $500 million to $1 billion for offshoreenergy assets. AIR says it does not expect significant phyicaldamage to offshore oil rigs and platforms.

Much of the damages caused by Isaac is due to flooding—a perilnot covered by a standard homeowners' insurance policy whetherflooding is caused by rain or storm surge.

Up to 25 inches of rain fell in some spots in Louisiana, whereIsaac made landfall twice as a Category 1 hurricane and themodelers agree Isaac's storm surge levels, which eclipsed somefloodwalls, were high for a storm of Category 1 strength.

The AIR estimate assumes a 10 percent take-up rate forcommercial flood policies.

Additionally, “Isaac's slow forward speed and refusal todissipate will exacerbate wind damage,” says Tim Doggett, principalscientist at AIR.

Due to all the rain saturating the ground, trees can fall atlower wind speeds, he says. Roofs can become “fatigued andoverloaded, causing additional damage,” as the wind persists, headds.

Reported wind damage includes downed power lines and trees aswell as some structures and items such as awnings, signage andtrailers, AIR says.

More than half a million customers are still without power,according to reports from the local electric provider, Entergy.

Tornadoes spawned by the storm system remain a threat. Eqecatsays nine tornadoes were reported in southern Mississippi andAlabama on August 29 and more were reported on Aug. 30.