Ivan targets Alabama; damage could reach US$10 billion

Hurricane Ivan was making its unwelcome arrival on the coast of Alabama late Wednesday, and risk modeler Risk Management Solutions (RMS) says the storm could produce US$4-$10 billion in insured damage based on current forecasts.RMS says the high end of its estimates take in landfall on the coast from Mississippi to Mobile Bay, Alabama, the path which the category-4 hurricane was taking as of late Wednesday. As of Wednesday, Ivan was maintaining sustained winds of 135 mph and showed few signs of weakening significantly before making landfall in the U.S.According to the National Oceanic and Atmospheric Administration (NOAA), a hurricane warning (which means the expectation of landfall within 24 hours) was in effect for the area from Grand Isle, Louisiana to Apalachicola, Florida, including the Greater New Orleans area and Lake Pontchartrain. The biggest threat, risk modelers agree, is a hit on New Orleans, which is at sea level and offers little protection. Residents were fleeing the entire state of Louisiana Wednesday. A direct hit to states such as Mississippi and Alabama would prove more costly than to Florida, notes RMS, as state-sponsored reinsurance like the Florida Hurricane Catastrophe Fund (FHCF) is not available in these areas, so the brunt of losses would be borne by private insurers.Another concern are oil and gas platforms off the coast of Louisiana, Mississippi and Alabama, RMS adds. “Oil producers have evacuated platforms in the area, cutting production by one million barrels a day, equivalent to about 5% of U.S. consumption. Platforms are typically designed to withstand category 1 and 2 force winds, but damage would be expected for category 3 and 4 force winds, as currently forecast for Hurricane Ivan.” RMS notes that Hurricane Lili caused almost US$500 million in insured damage to offshore production areas in 2002.