Frances Creates A Claims Avalanche

While Charley had maximum wind gusts of 145 mph and was a Category 4 hurricane, Frances' winds got up just over 100 mph and remained a Category 2 Tropical Storm.

But Charley's area of maximum winds had a diameter of around 20 miles, while Frances had one of about 80 miles.

"Charley was a much smaller, faster storm. So even though it produced different kinds of losses, overall the dollar amount will be about the same," said Mr. Khanduri.

He also noted that since Frances moved at about a quarter of the speed of Charley, the fact that it inflicted damage for so much longer a period of time will add to the costs.

So far, AIR predicts that insured losses from Frances will fall in the $5-to-$10 billion range.

AIR spokesman Mike Gannon said due to the volume of claims that Frances is likely to produce, an actual loss figure will take many months to arrive at.

Other industry officials agreed.

John Eager, senior director of claims for the Property Casualty Insurers Association of America said that some member companies began processing claims early Monday morning.

"Early reports indicate damage is much more widespread due to the path and the size of Frances, and as a result we expect to see a much larger volume of claims than we saw in the aftermath of Charley," Mr. Eager said. "However, damage is generally is not as severe and much of the damage is flood-related."

Standard & Poor's Rating Services in New York said that it expects a greater proportion of damage to be attributed to flooding than was the case with Charley, a risk that is born to some extent by federal flood insurance and will therefore serve to mitigate somewhat the exposure of the private sector.

Among those losses that will be covered by private sector insurance, Standard & Poor's said it expects to see proportionately more commercial lines losses, particularly of a casualty nature (such as business interruption), than was the case with Hurricane Charley.

The rating firm said if the gross losses of primary homeowners' writers should exceed the reinsurance coverage provided by the Florida Hurricane Catastrophe Fund, individual companies' reinsurance programs would be affected.

S&P said reinsurers in turn might rethink their approach to modeling catastrophes to give greater weight to the frequency of such events than before.