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Business Title: Hurricane Irene’s Estimated U.S. Cost for Insurers Drops to $2.6 Billion Hurricane Irene’s estimated cost to insurers fell to about $2.6 billion in the U.S. as the storm lost strength en route to New York, according to Kinetic Analysis Corp., a firm that predicts the effects of disasters. That compares with a projection last week from the Silver Spring, Maryland-based company of as much as $14 billion when Irene was forecast to make landfall in New York as a Category 2 hurricane. Total economic losses, including those that aren’t insured, may be about $7 billion. “Insurers may get off pretty easy,” Charles Watson, Kinetic’s research and development director, said in a phone interview from Savannah, Georgia. “This one’s not the straw that broke the camel’s back.” Estimates of losses declined as Irene weakened from a hurricane to a tropical storm. Insurers may face losses of $200 million to $400 million in North Carolina and South Carolina, according to risk-modeling firm Eqecat. That’s less than the $1.4 billion in insured losses North Carolina sustained from Hurricane Floyd in 1999, one of the costliest storms to hit that state, according to the Insurance Information Institute. “The first initial estimates were that the storm was going to be a lot more severe,” Tom Larsen, senior vice president at Oakland, California-based Eqecat, said in a phone interview. “Sometimes they look big and they’re not, and sometimes they blow up really quickly and become a major loss.” Eqecat and other modeling firms needed more time before releasing estimates for mid-Atlantic states, New York and New England. Losses in those regions could create volatility in the projections, Larsen said. Irene struck New York City yesterday at around 9 a.m. local time as a tropical storm with winds of 65 miles (105 kilometers) per hour, before pushing into New England. The storm caused rivers to surge and knocked out power to more than 6 million customers in 12 states and the District of Columbia. At least 18 people died from Puerto Rico to Connecticut. Much of the insured flood damage to homes along the coast will be shouldered by a government-run program, said Kinetic’s Watson. Standard homeowners’ policies sold by private carriers don’t include that protection. The government also will face costs tied to clearing debris and fallen trees. “Cleanup is going to be about half of the real cost of the storm, and that’s a government expense,” Watson said. Insured losses may include hotel and living expenses for policyholders who were forced to evacuate, according to AIR Worldwide, a Boston-based risk-modeler. More than 2 million people were ordered to leave low-lying areas before the storm. The majority of them were in New York and New Jersey, where hotel rates and living expenses are among the highest in the U.S., AIR said. Business-interruption claims also can add to insurers’ costs. More than 10,000 flights were canceled as officials shuttered airports in the New York metropolitan area, the busiest U.S. travel market. The National Association of Insurance Commissioners called off its Summer National Meeting in Philadelphia, scheduled to begin today, after members scrapped travel plans. State Farm Mutual Automobile Insurance Co., the largest U.S. house and car insurer, said more than 3,000 homeowners’ claims and about 670 auto claims had been filed in North Carolina, Virginia, Pennsylvania, New Jersey, New York and Connecticut as of 3 p.m. yesterday. Data from Delaware and Maryland weren’t immediately available. The insurer was receiving reports of downed trees, siding and roofing materials blown off houses, power failures and “a lot of claims for loss of refrigerated food,” said Jon Hannah, a spokesman for Bloomington, Illinois-based State Farm. Allstate, the second-largest U.S. home and auto insurer, said that claims adjusters near Greenville, North Carolina saw snapped trees, according to April Eaton, a spokeswoman. Damage in the U.S. from Irene will add to losses already sustained in the Caribbean. The storm whipped through the Bahamas before heading to North Carolina. AIR estimated insured losses of $500 million to $1.1 billion in the Caribbean, while Eqecat said losses may be $300 million to $600 million. Lower losses may mean that reinsurers won’t bear much of the costs related to Irene, said Randy Binner, an analyst at FBR Capital Markets, in a note to clients today. Primary carriers such as Allstate, Hartford Financial Services Group Inc. and Travelers Cos., buy coverage from reinsurers to cover the costliest disasters. Those protections may not be triggered in this disaster, he wrote. Insurers have faced costs tied to other catastrophes this year, including an earthquake in Japan, tropical cyclone in Australia and tornadoes in the U.S. Natural disasters caused more than $2 billion in claims at Allstate in the three months ended June 30 and erased second-quarter profit. Travelers was also unprofitable in the period. Disasters outside the U.S. led to a first-quarter underwriting loss at Warren Buffett’s Berkshire Hathaway Inc. (BRK/A) “The industry as a whole is having a catastrophe-prone year,” said Eqecat’s Larsen. “This is just one more to pile on top.” Losses from catastrophes may lead some insurers to seek rate increases or stop writing new policies in some areas. Allstate has said it is scaling back in coastal areas of eastern and southern states where it doesn’t think it can charge adequate premiums. Carriers have faced a rise in U.S. natural disasters, said Robert Hartwig, president of the Insurance Information Institute. “Insurers incorporate these long-term trends into their rates,” he told Matt Miller and Deirdre Bolton on Bloomberg Television’s “Inside Track.”
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#1. To: Brian S (#0)
$50 Billion and counting.
We were in a Depression. 50% of Americans couldn't come up with $1000. 65 million affected. 1 in 5. 50% of '1 in 5' = 1 in 10. 1 in 10 Americans could not afford to get out of the way of Irene. 1 in 10 Americans can not afford to have power restored. Then 25 million w/o power.
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