III pegs Charley loss at US$7.4 billion

With insured losses expected to reach US$7.4 billion, Hurricane Charley will likely be the second-most costly hurricane in U.S. history, says the Insurance Information Institute (III).With risk modelers casting estimates in the US$5-$10 billion range, the III says the total based on its estimates is right in the middle, at US$7.4 billion. This still puts Charley well back of 1992’s Hurricane Andrew at US$20.3 billion (in 2003 dollars), but ahead of Hurricane Hugo which caused US$6.2 billion in insured damage in 1989.The estimate does not include economic losses not covered by insurance such as lost wages and revenues, tax receipts, uninsured property damage and government disaster relief payments, explains III chief economist Robert Hartwig. It also does not include flood and crop losses which are covered by government-run schemes. It does include personal and commercial property losses, include auto damage, as well as some business interruption cover triggered by mandatory evacuations.Hartwig notes the state’s largest insurer is Citizens Property Insurance Corp., a facility for consumers who cannot get coverage in the voluntary market. He adds that in coastal Florida, hurricane coverage usually has a deductible expressed as a percentage, rather than a dollar amount.”While formidable, Charley falls generally within the range of catastrophic risk that insurers anticipated and built into insurance premiums for homeowners and businesses in hurricane prone areas,” says Hartwig. “I would not expect the storm by itself to have a significant effect on the availability or cost of insurance in Florida.”Few insurers have disclosed losses thus far, although Swiss Re is expecting losses below US$200 million, while XL expects a US$125 million price tag, and Coverium says losses will be below US$25 million.