CAT Modelers: Ivan’s Estimated Losses Up to $10B

Initial estimated insured losses from Hurricane Ivan range from about $2 billion to about $10 billion, according to catastrophe modelers Eqecat, Inc. The estimated range of insured losses takes into account Category 3 Ivan’s landfall on Sept. 16 between Mobile, Ala., and Pensacola, Fla., with a maximum sustained wind at landfall of 130 mph.

Catastrophe modeler Risk Management Solutions (RMS), based in Newark, Calif., estimates insured losses from Ivan in the United States will range from $2 billion to $7 billion. Additional insured losses of $1 billion are expected from damage in the Caribbean over the past week, with the majority occurring in the Cayman Islands, RMS said. Catastrophe modeler AIR Worldwide of Boston estimates insured losses in the United States from Ivan will be between $3 billion to $6 billion. Losses in the Caribbean are likely to add another $1 billion and $2.5 billion to the total, AIR said. Eqecat Inc. estimated the losses at $4 billion to $10 billion.

The triple-whammy hits of Hurricanes Ivan, Frances and Charley combined probably produced about $13 billion to $15 billion in losses, which rivals the losses of the costliest hurricane ever — 1992’s Hurricane Andrew — at least before it’s adjusted for inflation, said Robert Hartwig, chief economist of the Insurance Information Institute.

U.S. property/casualty insurers are expected to pay between $6.8 billion and $7.4 billion for insured property losses from Charley, a Category 4 hurricane that slammed southwestern Florida and other areas of the eastern seaboard starting Aug. 13. Charley is the second-costliest hurricane for insurers after the devastating Andrew, causing insured losses of about $15.5 billion. Less than three weeks later, over the Labor Day weekend, a less severe, but much more widespread Hurricane Frances, a Category 2 storm, slammed the Sunshine State, this time making landfall on its eastern coast. Catastrophe modelers have placed Frances’ estimated insured losses in the range of $2 billion to $10 billion.

Although solid numbers aren’t out yet for Frances, estimated losses range between $4 billion to $5 billion — a higher number than Ivan, estimated Sam Miller, a spokesman for the Florida Insurance Council.

Hartwig reiterated that “the industry is financially capable of handling” Ivan’s losses.” The long and the short of it: three losses, bad quarter, but not a solvency-threatening event,” he said. The majority of property/casualty insurers have prepared for the storms by, among others, securing enough private reinsurance to cover their losses.

The areas that got hit by the highest winds were Baldwin County, Ala., and Escambia and Santa Rosa counties in Florida, Eqecat said. Pensacola is located in Escambia County. About 30% to 50% of the losses from Ivan are expected to be in Florida, the bulk of the remainder of the losses are distributed among Alabama, Mississippi and Louisiana.

Ivan did not hit major metropolitan areas in the southeastern United States, such as New Orleans, Tampa, or Miami, but came ashore just east of Mobile at Gulf Shores, Ala. The storm hit less densely populated areas. In addition, whether damage is from storm surge, which is a form of flooding, or whether it’s flooding due to a river or a lake overflow, it’s not covered by homeowners insurance policies or commercial property policies.