AIR pegs Rita losses at US$2.5-$5 billion

Catastrophe risk modeling company AIR Worldwide Corporation estimates Hurricane Rita will cost the insurance industry a total of between $2.5 billion and $5 billion in losses.Rita made landfall between Sabine Pass and Johnson’s Bayou on the Louisiana coast as a Category 3 hurricane. At landfall, Rita had maximum sustained winds of 120 mph.Hurricane Rita’s strongest winds tracked over the sparsely populated western Louisiana coast, resulting in relatively low insured losses for a storm of its intensity and size. The Texas cities of Beaumont and Port Arthur, as well as Lake Charles in Louisiana, will likely see the most significant damage with damage extending as far south as Galveston, Texas, and as far east as New Orleans, Louisiana. Storm surges of 10 to 15 feet, with local heights of up to 20 feet in inlets and bays, will result in additional damage.”We expect to see significant damage to residential and commercial properties near and to the east of Rita’s track,” said Dr. Jayanta Guin, vice president of research and modeling at AIR Worldwide. “Sustained winds of 120 mph will cause unreinforced masonry walls to collapse, tear shingles and siding off structures. “Fortunately, the heavy commercial and industrial areas of Port Arthur and Beaumont with their numerous refineries were to the left of the storm’s track, where wind speeds are lower, so we do not expect to see significant structural damage to the refineries.” Insured losses from Hurricane Rita would have been much worse had it maintained its more westerly track and hit the Houston/Galveston area. Just 48 hours before landfall, Hurricane Rita’s central pressure made it the third most intense hurricane ever observed in the Atlantic basin. However, Rita slowly weakened as it approached the coast.”We expect insured losses from Hurricane Rita will be much lower than those caused by Hurricane Katrina,” continued Guin. “While both reached Category 5 status in the warm waters of the Gulf, Katrina maintained much of that intensity at landfall, while Rita weakened significantly. In addition to being a smaller and less intense storm, Rita’s strongest winds impacted an area with far fewer insured properties than Katrina.”