RMS Revises Hurricane Katrina Loss Estimate to $20-$35 Billion

September 4, 2005

Risk Management Solutions (RMS) increased its estimated insured losses forecast for Hurricane Katrina’s direct impact to $20-$35 billion late last week.

When Katrina’s landfall, RMS released a preliminary estimate of $10-$25 billion for insured losses, but has increased that estimate based on more detailed information from aerial and ground reconnaissance on wind and storm surge damage, as well as updated reports on damage to offshore platforms that sustained Category 5 winds in the Gulf of Mexico.

Hurricane Katrina can be viewed as two loss events, reports RMS: the direct impact from the wind and storm surge, and the subsequent flooding that occurred in New Orleans as a result of the levee breaks starting on Tuesday, Aug. 30. The assessment of estimated losses associated with the New Orleans flood is ongoing, and RMS expects the insured loss estimate to increase as the extent and duration of flooding are better defined.

RMS expects total economic losses from both events to exceed $100 billion, including both insured and uninsured components of loss. In major catastrophes, the uninsured component of loss often equals or surpasses the insured component.

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