Katrina Estimates Still Best Guesses
While the industry is just beginning to sort out the potential loss from Hurricane Rita, Katrina remains a major headache for carriers to assess as well.
Last week, AIR Worldwide issued an estimate that property claims caused by water damage from Hurricane Katrina would total approximately $44 billion. Of the figure, about half–$22.6 billion–was for New Orleans alone.
Michael Gannnon, a representative for AIR, said the Boston-based modeler is sticking to its original insured loss estimate range of $17-to-$25 billion for property wind losses, auto and commercial flood claims.
"We conducted this analysis because there is a great deal of uncertainty among insurers as to how much of the total water damage from Katrina they will ultimately have to cover," said Jayanta Guin, vice president of research and modeling at AIR. "By providing our clients with a detailed analysis of the total water damage, each company can estimate the losses to its portfolio by applying its own assumptions about the likely payout."
In other Katrina updates:
o Munich Re issued a statement giving its own estimate that the two events combined would result in an industry loss of $40 billion ($30 billion for Katrina and between $5 billion and $10 billion for Rita)–considerably below the estimates of some modelers and rating services, which said losses could be closer to $70 billion.
The Berlin-based insurer put its own losses at $600 million from Katrina and $180 million from Rita, warning that "significant uncertainties remained."
o St. Paul Travelers estimated its gross loss from Katrina would be $2.5 billion, which after taxes and reinsurance would be reduced to $800 million. The amount included the cost of reinsurance reinstatement premiums.
o Markel Corp., a writer of specialty insurance, said it estimates losses to range from $125-to-$150 million after taxes and reinstatement of reinsurance premiums. The estimate, the carrier cautioned, is preliminary.
o Seattle-based Safeco announced its estimated loss–pretax and before reinsurance–would stand at $170 million on Katrina ($120 million after reinsurance). Its after-tax catastrophe loss is estimated to be $78 million. The company said it has made partial or full payment on the majority of claims where its adjusters have gotten in.
It noted that due to the difficulty of getting into some areas, the estimate is subject to further refinement.
o On the claims front, Fireman's Fund said it would treat homeowners policy damage from both Katrina and Rita as one event, similar to the policy the company formulated last year when four hurricanes lashed Florida.
Callout:
"There is a great deal of uncertainty among insurers as to how much of the total water damage from Katrina they will ultimately have to cover," warns AIR.
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