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Katrina expected to cost $34.4 billion

Hurricane Katrina is likely to result in at least $34.4 billion in personal and commercial property loss claims, according to the first publicly released survey of the nation’s insurers.
/ Source: The Associated Press

Hurricane Katrina is likely to result in at least $34.4 billion in personal and commercial property loss claims, according to the first publicly released survey of the nation’s insurers.

ISO’s Property Claim Services Unit said Tuesday that the preliminary estimate of damages to homes and businesses in six states would make Katrina the most costly U.S. natural disaster ever, surpassing the inflation-adjusted $20.8 billion in losses from Hurricane Andrew in 1992.

Several risk assessment companies earlier released projections of insured losses from Katrina, with totals ranging from $14 billion to $60 billion.

The ISO’s tally includes anticipated insurance industry losses for personal and commercial property, including boats and vehicles, business interruption coverage and additional living expenses. Reported damaged to insured onshore oil facilities is included, ISO officials said.

The estimates exclude losses to utilities, agriculture, aircraft, offshore drilling platforms and property insured under the federal flood insurance program.

Also Tuesday, the Securities and Exchange Commission said it was easing rules for insurance companies to raise capital, responding to concern that the billions of dollars of losses from Katrina and Hurricane Rita could make it harder for the insurers to pay victims’ claims.

The losses could drain capital and cash from the companies. In relaxing the rules for them to tap into the capital markets, the SEC “recognized that the risk is out there for the industry,” said Keith Buckley, a group managing director at Wall Street credit agency Fitch Ratings.

ISO, an insurance risk and data firm based in Jersey City, N.J., said that policyholders in the six affected states — Louisiana, Mississippi, Alabama, Florida, Tennessee and Georgia — were expected to file more than 1.6 million claims for damage to personal and commercial property, automobiles, boats and yachts.

“The personal property loss claims include nearly 75,000 boats and yachts in the affected states, with an estimated insured value of slightly under $2 billion,” the ISO report said.

The report said that Louisiana, the state hardest hit when Katrina made landfall on Aug. 29, was expected to produce 900,000 claims for some $22.6 billion in losses.

It gave these estimates for the neighboring states: Mississippi, 490,000 claims for $9.8 billion; Alabama, 123,000 claims for $1.3 billion; Florida, 110,000 claims for $468 million; Tennessee, 8,400 claims for $46.1 million; and Georgia, 3,300 claims for $22.2 million.

The report said that insurers were still assessing losses, noting that access to some badly damaged areas in Louisiana was complicated by flooding. It also said tracking down property owners who evacuated was proving difficult.

ISO said it “will resurvey insurers in 60 days as more claims are filed and existing claims are closed” to update its findings.

The SEC said in its announcement that it would, among other things, allow publicly traded insurance companies to submit reduced paperwork for registering new issues of stock with the agency.

“The SEC remains committed to doing everything possible for the victims of Hurricane Katrina and Hurricane Rita,” agency Chairman Christopher Cox said in a statement. “... We will work to ensure that our regulatory processes do not interfere with market access. The SEC will do what it can to see to it that every victim’s insurance has the capital to back it up, and that there are no unnecessary delays in paying claims due to a lack of” available money.

The changes will be in effect through Dec. 1.