Jeanne Damage May Hit $14 Billion: Modeler

Jeanne Damage May Hit $14 Billion: Modeler

By Daniel Hays

NU Online News Service, Sept. 26, 10:15 p.m. EDT?As Hurricane Jeanne smashed through Florida, the early projections from risk modelers put the storm's possible insured loss at anywhere from $1 billion to $14 billion.

Meanwhile, insurance professionals said it was possible several small local insurers could fail from the impact of the state's fourth hurricane in the past two months. Jeanne made landfall in St. Lucie and Martin counties, Florida and by evening19 counties had been declared disaster areas.

Risk modeler Eqecat, Inc. in Oakland, Calif. said early today that, based on National Oceanic and Atmospheric Administration data, Jeanne would cause estimated insured losses ranging from about $6 billion to about $14 billion, depending on the track of the storm after landfall, the intensity, and ongoing damage. Friday Eqecat was projecting a possible $2 billion to $5 billion loss.

Risk Management Solutions of Newark, Calif. put the broad range insured loss estimate for the storm at $4 billion to $8 billion. Kyle Beatty, an RMS spokesman, said the company would begin refining its estimate tomorrow using aerial survey photos and ground reconnaissance from engineering teams.

Applied Research Associates in Raleigh, N.C. put the estimated insured loss at $1 billion to $3 billion and spokesman Peter Vickery said that figure, "will probably come down a little later."

Eqecat noted that major hurricanes, Charley, Frances, and Ivan, have already produced combined insured losses of between $15 billion and $20 billion in Florida .

Alan Levin, chairman of the insurance and reinsurance practice for Edwards & Angell law firm in Hartford, Conn., said, "Some small Florida insurers may not have the wherewithal to survive, but overall the state's industry is strong and has the capacity to pay the claims from Charley, Frances, Ivan and Jeanne.''

However, Mr. Levin said, "Smaller regional domestics may have problems."

Sam Miller, executive vice president of the Florida Insurance Council, noted that the state's top insurance regulator Chief Financial Officer Tom Gallagher has already warned that a couple of companies may be in difficulty because of storm losses. Mr. Miller said that is a small number considering there are 400 insurers in the state writing residential coverage.

If companies do go under "we have the guaranty fund," he noted.

Jeanne, which came ashore at Hutchinson Island and Sewall's Point as a Category 3 storm on the five step Saffir Simpson scale, made landfall with 120 mph hour winds close to the same spot where Hurricane Frances first struck. "Eerily similar, " said Mr. Miller.

Mr. Levin said a fourth storm hitting Florida means "insurance companies have unprecedented challenges ahead with respect to loss adjustment. Power is going to take weeks to restore. The strain on all major writers such as Allstate, The Hartford, Chubb, St.Paul/Travelers is going to be real.

"Most of the companies we have looked at have blown through a third quarter CAT load. We can expect it will bring down earnings per share for all those companies."

Insurance professionals said before Jeanne arrived they believed their industry could cope with a fourth blow to Florida, because staff are already there working on the remains of the three prior storms.

Mr. Miller said insurers had a lot of personnel in the area of the "Treasure Coast'' that comprises Fort Pierce and Vero Beach. "They're still working Hurricane Frances claims," he said. Not since the nineteenth century when four hurricanes hit Texas has any state endured a landfall by four hurricanes in one season, he noted.

Mr. Miller said that he guessed there may be as many as 20,000 adjusters in place. He noted that in addition to fulltime Florida adjusters, the state has issued emergency adjusting licenses to 12,000 people.

He said the council will work with the Department of Financial Services, and individual insurers will set up mobile command centers next to wherever the state locates its recreational vehicle that serves as an emergency operating headquarters.

Roger Morris, speaking for the Property Casualty Insurers Association of America in Des Plaines, Ill., said that the insurance industry can withstand a fourth Florida hurricane hit.

"Claims will be paid--the money is there and Florida is well positioned," he said, mentioning the Florida Hurricane Catastrophe Fund, which reinsures carriers after a $4.5 billion loss event, as well as the state-run Citizens Insurance pool.

The insurance industry, in response to all the hurricane activity, is "bending and not breaking," he added. "[Jeanne] will add some stress, but will not affect the very positive response we've seen from the industry."

Late Friday Philadelphia Consolidated Holding Corp. based in Bala Cynwyd said its loss from Hurricane Frances was estimated at $6.8 million and the figure for Hurricane Ivan was between $5.5 million and $6.8 million.