Expert: Frances Could Cause $60 Billion Damage

Expert: Frances Could Cause $60 Billion Damage

By Daniel Hays

NU Online News Service, Sept. 2, 4:20 p.m. EDT?Insurance experts said today that if Hurricane Frances stays on its projected course for Florida, it could inflict insured losses well above the estimated $6.8 billion damage level of Hurricane Charley, with one saying a maximum-level hit could cause $60 billion in total destruction.[@@]

Lawrence Twisdale, a principal with Applied Research Associates in Raleigh, N.C., said there are "estimates of $20 billion on up."

Mr. Twisdale, whose firm produces HURLOSS, a proprietary estimation tool for insurers, said the eventual loss would depend on the final track and the wind speed when the hurricane hit. With that data still missing, damage predictions "are in a pretty wide range," going as high as "$50- to $60 billion," he said.

Applied Research developed the wind speed portion of the HAZUS risk assessment software for the Federal Emergency Management Agency. HAZUS produces estimates of damage before and after disasters.

The system estimates physical damage to residential and commercial buildings, schools and infrastructure, as well as economic losses involving jobs, business interruptions, and repair and reconstruction costs. It also estimates the social impact of a disaster, including requirements for shelters and medical aid.

The last hurricane to hit Eastern Florida that reached the Category 4 level projected for Hurricane Frances, with winds up to 135 miles an hour, was Hurricane Andrew, which caused a $20.3 billion insured loss.

A spokesperson for Air Applied Insurance Research modeling team, AIR Worldwide, added that "if the National Hurricane Center's forecast track and intensity prevail, Frances has the potential to replace Andrew as the costliest hurricane in U.S. history. While less intense than Andrew, Frances is a much larger system, and so may affect a much larger area of heavily populated coastline."

Tropical Storm Risk, a division of Benfield's Hazard Research Centre, noted that no year since 1950 has seen two Category 4 hurricanes strike the United States. Charley, which hit Florida on Aug. 13, was a Category 4.

On Frances, Mark Saunders, a TSR hurricane expert in London, said today that "it's quite probable it will strike as a Cat 4." He said the factors keeping its level high are above-average ocean heat around the Bahamas and a lack of any surrounding wind shear.

"The damage is likely to be larger than Charley given that it's a larger hurricane [in area]," he noted.

Carolyn Gorman, an Insurance Information Institute vice president in the organization's Washington office, said Frances' insured damage level compared with Charley "could be that much again. If it does what they [forecasters] say, it's certainly going to hit a highly populated, very developed area of Florida."

But Ms. Gorman said she believed insurers would still be able to handle that amount of loss without an impact on rates.

She noted that they had made changes in how they sell insurance and had been projecting for such losses. "Even if it were to be another $6.8 billion, it certainly wouldn't put insurers out of business, and they know such losses are possible," she said.

She said she thought homeowners in the target area would not be expecting a storm of such power, adding "they haven't had a hurricane in a long, long time."

On Sept. 9 in Orlando, Fla., the Fall Board and committee meetings of the National Association of Professional Insurance Agents is due to kick off.

"We're proceeding on the assumption we will hold the meeting," said Ted Besesparis, a spokesman for the Alexandria, Va.-based group. "We're still good to go for this, pending what happens. We're anticipating being there in the aftermath and hope to set up something so members can volunteer to help with relief efforts."

The event is being held in the 24-story Rosen Center Hotel. Mr. Besesparis said he did not what the building was constructed of.