Hurricane Ike to Cost Insurers $7B to $12B, RMS Says in Revised Tally

September 18, 2008

Risk Management Solutions (RMS), the catastrophe risk modeling firm, has refined its estimate for U.S. onshore and offshore insured losses from Hurricane Ike to $7 to $12 billion from its original estimate of $6 to $16 billion.

This estimate includes both onshore and offshore losses resulting from strong winds and storm surge but does not include losses covered under flood policies issued by the National Flood Insurance Program, or loss of oil and gas production due to pipeline supply interruptions.

The revised estimate is based on analysis of damage reports, verified wind speed and tidal gauge observations, and on-site assessment from multiple reconnaissance teams.

“Our reconnaissance teams have focused on evaluating wind and storm surge damage in the landfall region, and they have found that despite some severely affected coastal areas, Ike wasn’t as damaging as initially feared,” commented Dr. Christine Ziehmann, director of model management at RMS. “While the 75- story JPMorgan Chase tower was extensively damaged, the majority of downtown Houston had minimal damage. They also found that most of the large industrial facilities, including the oil refineries, escaped significant flooding or other damage, though they are dependent on power being restored to regain operations.”

She said that one of the remaining uncertainties will be how much of the onshore loss will be paid out under flood or wind policies, particularly for the destroyed coastal communities of Bolivar, which were subject to some of Ike’s strongest winds and storm surge.

Losses to offshore oil and gas platforms will contribute a relatively small proportion of the total insured losses for Ike, since winds and waves offshore were generally within the design levels for the platforms.

Source: RMS

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