Texas' insurance pool could be in for a major test if Hurricane Emily strikes the state's Gulf Coast, according to an insurance industry trade group.

The coastal area has three highly developed communities with the potential for significant losses, namely Galveston, Corpus Christi and Brownsville, said Mark Hanna, a spokesman for the Insurance Council of Texas, a state trade association.

This afternoon Tropical Storm Risk, a unit of Benfield, projecting 69 hours ahead for Emily, put the risk of hurricane winds hitting South Texas at no more than five percent, with a higher risk of 10 to 20 percent that the state would be touched by tropical storm winds.

Mr. Hanna said in a worst case scenario, a hurricane hitting the Galveston area, pushing up into Houston and the Houston shipping channel could produce "billions of dollars in damage." The city is home to a lot of high-end residential housing and businesses, he said.

In Corpus Christi, there are both residential and commercial interests, including fishing fleets. Brownsville, which sits on the border with Mexico, is home to a large residential community and hotels. There is also significant residential growth on South Padre Island, a barrier island near Brownsville along the Gulf of Mexico, Mr. Hanna pointed out.

For policyholders along the Gulf Coast, Mr. Hanna said their insurance is placed in the hands of the Texas Windstorm Insurance Plan Association, an insurance pool and provider of last resort. He said the program provides wind and hailstorm coverage along the water.

All insurers who write in the state are members of the pool. Their percentage of participation is based upon the percentage of the property insurance market they write in the state.

According to a summary of participation, of the top three, Travelers Property Casualty Group is the biggest participant, with less than 12 percent of the pool (St. Paul Companies, which merged with Travelers to form St. Paul Travelers, has slightly less than 2 percent participation). That is followed by USAA Group, with less than 10 percent, and Nationwide Group with 6.5 percent.

Mr. Hanna noted that two-fifths of the $24 billion coverage in Texas Windstorm covers Galveston, one-third is Corpus Cristi, and the remainder is in the Brownsville area.

Should the pool be wiped out, he said, the state would step in to cover losses.

On Friday, the National Weather Service said Emily stood as a Category 3 hurricane on the five-point Saffir-Simpson Scale with sustained winds at 115 mph as of 2 p.m. The storm continues to move west-northwest, clocked at 20 mph. It is expected to pass Jamaica on Saturday.

Professor Mark Saunders at the Tropical Storm Risk at the University of London, part of the Benfield-Greig Group, said there is a 13 percent chance tropical force winds will affect the U.S. and a 4 percent chance the hurricane will hit.

Meanwhile, clean-up of damage from Hurricane Dennis that struck the Florida panhandle last Sunday continues. Losses from the storm are estimated to be between $1 billion and $5 billion.

With power outages and phone service cut off in some areas, claims in both Florida and Alabama are still trickling in, said Hart Hubbard, director of catastrophic services for Parsippany, N.J.-based GAB Robins, a claims management firm. He said unlike Ivan, Dennis was a very compact storm, and damage is limited to a "tightly knit area."

He said scattered claims are coming in from all along the western coast of Florida, where Dennis trekked along before striking the panhandle.

As for Emily, he said, "I'm always concerned, but it's pretty far south and we are really not sure where it is going. It still has a long way to go. By Monday we should know better."

This article updated 4:28 p.m.

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Texas Pool Could Come Into Play With Emily

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