Washington – Hurricane Katrina seems likely to become the most expensive natural catastrophe in U.S. history, but unless insured damages go far higher than the current high-end estimate of $35 billion, the insurance industry should be able to pay the claims without threat to its own solvency, industry experts said Tuesday.
Because of the nature of the storm and the type of damage inflicted, private insurers will probably bear only a fraction of the total losses suffered in Louisiana, Mississippi and Alabama – estimated at more than $100 billion, by Risk Management Solutions Inc., a California firm that does computer modeling of damages from catastrophes.
But taxpayers, insurance ratepayers and others are likely to be feeling the economic effect of the giant storm for years to come, they acknowledged.
And some risk experts are starting to raise the question of how – or if – houses or other buildings in low-lying areas such as New Orleans should be rebuilt.
“There is a lot of variability” in loss estimates so far, said Robert Hartwig, chief economist at the Insurance Information Institute, an industry group, adding that insurers are expecting more than 1 million claims.
But “the industry approached the ’05 hurricane season in a position of financial strength” after eight months of very strong earnings, he said.
Insurers “were able to bear the $23 billion (in losses) from last year’s four storms” in Florida with no significant insolvencies, and “that will remain that same this year,” Hartwig said.
