Katrina Could Cost Insurers Up to $30 Billion, Forecasters Say

August 29, 2005

Oakland, Calif.-based EQECAT, Inc., Oakland, Calif., announced Sunday afternoon that based upon current information provided by the National Oceanic and Atmospheric Administration (NOAA) about Hurricane Katrina, preliminary estimated insured losses could range from $15 billion to more than $30 billion, depending upon various factors at landfall along the Gulf Coast states.

The current EQECAT estimate is based upon potential landfall south of New Orleans, in Lafourche or Plaquemines parishes using the latest tracking data from NOAA on late Sunday afternoon, Eastern Time. However, hurricanes often make unexpected and dramatic changes in direction and intensity — both strengthening and weakening — as they move toward land. The actual intensity, and forward speed at landfall, coupled with the population and structural density at the landfall site, among other factors, can result in significant changes in assessments of preliminary estimated damage.

Storm surge (increased tidal heights forced by the wind and waves associated with the storm) is expected to increase tidal heights by as much as 28 feet in areas. Coupled with the expected 5 to 10 inches of rain with this storm, flooding is a large consideration.

Excluded from EQECAT estimates is potential insured damage to oil rigs in the Gulf. There are a numerous oil rigs and associated equipment and systems in the Gulf immediately off the coast of Louisiana. Damage to offshore platforms are not generally linked directly to wind speeds, but to wave heights. A slow-moving Hurricane Katrina, packing extreme winds, is expected to generate wave heights that could cause significant damage to those offshore assets.

EQECAT’s estimates regularly will be updated as additional information about the storm’s characteristics become available. Estimates are based on then-current storm conditions provided by various sources, such as NOAA.

Before moving into the Gulf of Mexico, Hurricane Katrina struck the southern Florida peninsula as a Category 1 storm. Estimated insured losses from that landfall range from $1 billion to $2 billion. On-the-ground teams will be assessing and refining those preliminary estimates.

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