Independent damage estimates

Estimates for property damages incurred as a result of Hurricane Katrina range from $9 billion to $26 billion, according to forecasters.

Estimates of insured losses on the Gulf Coast could range from $9 to $16 billion, according to Oakland, CA-based EQUECAT Inc.

AIR Worldwide estimates that Katrina may cost the insurance industry between $12 and $26 billion. These insured losses, according to AIR, will likely make Katrina one of the two worst natural catastrophes in U.S. history.

“While much of the damage from lower intensity hurricanes is limited to the roof covering, we expect structural damage and even catastrophic building damage from Katrina,” Jayanta Guin, AIR’s vice president of research and modeling, says.

Katrina’s most damaging winds narrowly missed New Orleans, but did impact densely populated areas. Of the more than $500 billion of insured value in the State of Louisiana, over 35% are in coastal counties impacted by Katrina. Over 10% of the total insured value of properties in Mississippi and Alabama are in coastal counties. “Building standards in the Gulf coast region are not as stringent as other hurricane-prone regions such as southern Florida,” Guin adds. “This combination is likely to result in increased wind damage to properties.” The magnitude of Katrina’s insured loss can be attributed to three primary factors: intensity, location and size.

“Damage does not occur instantaneously. Rather it accumulates over time from repeated battering,” Guin says. “Losses for Katrina would have been lower had the storm moved at a more typical pace.” Subjected to extended pounding by hurricane force winds, building components can weaken and fail. Therefore, Guin says there should not be much structural damage from Katrina’s Category 1 winds, but he explains that there will be damage to roof shingles, cladding and other non-structural components such as awnings. Mobile homes in particular, he continues, can sustain considerable damage when subjected to Category 1 winds over a long period of time.

In addition to the severe wind impacts, the potential for significant physical damage and loss of production to the offshore oil and gas industry, as well as storm surge flooding in the region must be taken into consideration, according to Kyle Beatty, RMS meteorologist.

“With its passage over the offshore platform field in the Mississippi Delta region as a Category 5, this could be the largest hurricane loss the offshore energy market has ever sustained.”

Meanwhile, high demand for repairs following Florida’s 2004 hurricanes drove repair costs up, adding significantly to insurers’ losses. “In an analysis of detailed claims data from the 2004 hurricane season, AIR found that the effect was magnified by the fact that the storms were clustered both in time and location,” Guin reflects.” Some of the damage from 2004 has still not yet been repaired and will impact the ability of contractors to respond to Katrina. In this way the damage from 2004 could lead to some increase in repair costs for Katrina.”