Katrina damage estimate reaches $20-$35 billion

Estimated insured losses from Hurricane Katrina’s direct impact have increased to $20-$35 billion, according to Risk Management Solutions (RMS), a provider of products and services for the management of catastrophe risk. On the day of Katrina’s landfall on the Gulf Coast, RMS released a preliminary estimate of $10-25 billion for insured losses. It has since increased its estimate, based on more detailed information from aerial and ground reconnaissance on wind and storm surge damage, as well as updated reports on damage to offshore platforms that sustained Category 5 winds as Katrina passed through the Gulf of Mexico. Hurricane Katrina can be viewed as two loss events the direct impact from the wind and storm surge, and the subsequent flooding that occurred in New Orleans as a result of the levee breaks starting August 30. Total economic losses from both events may exceed $100 billion, including both insured and uninsured components of loss, RMS predicts. In major catastrophes, the uninsured component of loss often equals or surpasses the insured component. Elements of uninsured losses that contribute to total economic losses after major catastrophes include:- homes and businesses not covered by insurance;- payment of deductibles and losses in excess of insurance coverage limits;- damage to uninsured public facilities and infrastructure, such as highways, roads, utilities, public buildings, etc.;- disruption of business and economic activity that is not covered by business interruption insurance; and- cost of government relief efforts.