The 100 billion dollar storm

[Skins24]

http://www.nytimes.com/2005/09/03/business/03insure.html?ei=5090&en=24acf0eb9f78dda3&ex=1283400000&partner=rssuserland&emc=rss&pagewanted=print

September 3, 2005

First Estimate Puts Storm's Economic Toll at $100 Billion

By JENNIFER BAYOT

A risk management firm yesterday offered the first estimate of economic losses from Hurricane Katrina - $100 billion - and said that private insurance would probably cover less than a quarter of that. Federal money and charitable contributions may need to do the rest.

Saying the damage already appeared far greater than expected, Risk Management Solutions in Newark, Calif., said that insured losses would range from $20 billion to $35 billion, much higher than the firm's initial estimate of $10 billion to $25 billion.

The new figures suggest that Hurricane Katrina will cost the insurance industry more than any other natural disaster on record, unseating Hurricane Andrew in 1992, which cost $21 billion in 2004 dollars, according to the Insurance Information Institute, an industry group. Katrina's price tag may also overshadow the $23 billion in insured losses caused by four large hurricanes last year in South Florida.

But there is far more that commercial insurers will not absorb.

Uninsured losses often include damage to roads, highways, utilities and public buildings, as well as the cost of government relief efforts. There is also the huge cost of not doing business, which the firm estimated at $100 million a day.

Not only will the total losses reach $100 billion, but they may keep climbing if efforts to repair the levees in New Orleans stall, said Kyle Beatty, a Risk Management Solutions meteorologist.

While the insurance industry's share of that $100 billion will still be high, "there's far more economic dislocation relative to the insurance dollars coming in," said Robert P. Hartwig, chief economist of the Insurance Investment Institute. Mr. Hartwig said that insurance dollars were often the most potent, since they came in the form of cash rather than low-interest loans. "It means that for New Orleans to get back to where it was the day before Katrina will take longer."

And he said that policyholders should not expect insurers to try to cover flood damage out of generosity.

"Insurers will pay every dollar that they promised to pay under the terms of their contact, but flood is very clearly excluded from policies, and it always has been," he said

To be sure, insurance companies could face still more liability, Mr. Beatty said, especially where looting and vandalism are at play.

But there will remain a large gap between insured losses and economic losses, suggesting that government and private donations will be hugely important to the region's recovery.

How the country will close the gap is unclear. Congress approved a $10.5 billion emergency aid package yesterday. The Federal Emergency Management Agency, which finances flood insurance for homeowners, is still repaying the Treasury for the $300 million it borrowed after last year's hurricane season.

"If the flood insurance fund runs dry, we can tap the Treasury," said Butch Kinerney, a spokesman for FEMA. "Chances are good we'll have to do that for this storm because of the catastrophic nature of it."

"Residents should not be worried that the flood insurance program is insolvent," Mr. Kinerney added. "Be assured, we're not going belly-up, and we're not going away."

The many homeowners who lack flood insurance - including 6 of 10 homeowners in New Orleans, according to federal data - will most likely be applying for aid.

And even getting people their money may prove more challenging than in past catastrophes.

"I think what makes this one different is just the sheer scope and size of it," said Ray Stone, vice president for catastrophe operations at St. Paul Travelers, which has one of the largest shares of customers in Louisiana. "It's just going to be a much, much longer haul."

Risk Management Solutions estimated that the flood in New Orleans had inundated 150,000 properties, making it the most damaging flood in the nation's history. The most recent flood of similar proportions, the firm said, was a 1953 flood in the Netherlands. It, too, was caused by a major storm surge that overwhelmed barriers protecting a city below sea level. That flood submerged 47,000 properties and killed 1,800 people. It took six months to pump the community dry.

[Sarge]

Well, so much for the 15 billion to Africa for AIDS. At least, that's what I would hope will happen

[DaFunky1]

I live near the coast of GA and when I bought my house in 1993 I was required to buy flood insurance. I am in a 500 yr flood zone and I though, at the time I bought my house, that why do I need insurance if it only floods on average here every 500 years? I have since learned from seeing these hurricanes that flood insurance is worth it. I think I paid $220 this year maybe a little more. If we had a storm surge here like they did in NO, my house would have roughly six feet of water in it (14 ft above sea level and I can see the marsh from my front door).

I am actually surprised that more people did not have it in NO. It isn't that expensive and the area they live/lived in is a lot more prone to flooding than it is here and my mortgage company required it. I'm sure some people had their houses paid off and felt no need for it. I have a hunch the Federal govt. will bail them out (no pun intended).

I hope they can recover and people learn from this and don't make the same mistakes again in the future.

Peace

[Larry]

I would assume that all mortgage companies require it.

I'd assume that the folks who didn't have it will be declaring bankrupcy, and a lot of banks are going to have "bought" a lot of vacant lots. (I'd also assume ("You keep using that word. I do not think it means what you think it means.") that the city, if they don't have one already, will need some law that requires people to demolish abandoned property, or the flooded-out properties will become health hazards.)

[CrabR]

insured losses

can you imagine how many did not have insurance, especially flood insurance

I live on the bay, and after Isabell I was surprised how many people that were flooded out did not carry flood insurance, their logic was the water never reached their house before.

I can imagine the same logic prevailed on the Gulf Coast also

[Johnny Punani2]

I live near the coast of GA and when I bought my house in 1993 I was required to buy flood insurance. I am in a 500 yr flood zone and I though, at the time I bought my house, that why do I need insurance if it only floods on average here every 500 years? I have since learned from seeing these hurricanes that flood insurance is worth it. I think I paid $220 this year maybe a little more. If we had a storm surge here like they did in NO, my house would have roughly six feet of water in it (14 ft above sea level and I can see the marsh from my front door).

I am actually surprised that more people did not have it in NO. It isn't that expensive and the area they live/lived in is a lot more prone to flooding than it is here and my mortgage company required it. I'm sure some people had their houses paid off and felt no need for it. I have a hunch the Federal govt. will bail them out (no pun intended).

I hope they can recover and people learn from this and don't make the same mistakes again in the future.

Peace

Hey funky,

Do you know any reason why housing prices are so low in Georgia? My wife and I were browsing the listings in your neck of the woods and our jaws hit the floor when we saw how much house you can get for the money.

Is there a lack of good paying jobs down there?

[airborneskins]

Hey funky,

Do you know any reason why housing prices are so low in Georgia? My wife and I were browsing the listings in your neck of the woods and our jaws hit the floor when we saw how much house you can get for the money.

Is there a lack of good paying jobs down there?

The cost of living is much lower. However, you do not get paid as much either. That is why people retire in the South. They have all the money already, and they do not need a job.

[Cskin]

I imagine there is going to be a large shift in insurance companies after this storm. We're going to see alot of mergers of the biggest and well positioned companies while the smaller ones go under.

Great... those smaller one's insurance policies are going to be paid for by John Q. Public's tax dollars. Another publicly held company I have to fork out money to save because people CHOOSE to live on the coast of the Gulf of Mexico..... where Hurricanes have been striking since the beginning of time.

I'm all for people living in harm's way.... but I believe their insurance should cover their losses.... and if it doesn't.... <shrugs shoulders>..... pick up and move on and rely on the compassion of charitable organizations until you can get back on your feet and start anew. Never happen.... not with the federal govt's tit so lovingly exposed and the huddled masses taught that it's there for them whenever they need it. :doh:

[Larry]

Never happen.... not with the federal govt's tit so lovingly exposed and the huddled masses taught that it's there for them whenever they need it. :doh:

Now, now.

Don't you worry. In this administration, covering tits ranks right up there with clearing brush.

[Cskin]

Don't you worry. In this administration, covering tits ranks right up there with clearing brush.

As if that somehow makes it ok.

Take the net away and make people fend for themselves. Protect the welfare of the citzenry should mean protecting our borders and maintaining a military capable of defending in case of attack.... not handing out checks, food, and building plans everytime a Hurricane makes landfall.

Let me make clear.... I'm disgusted with all in washington.... Dems and Repubs. As far as I'm concerned, they are both ****roaches hellbent on destroying this country so as to:

A)Protect or maintain power

B)Obtain and remain in power

C)Coddle special interest groups

D)Fill the offshore coffers.

Treasonous behavior in which the the great unwashed has withstood far to long.

Treasonous behavior allowed because of entitlements, welfare, and the perceived safety net every school and college in the country teaches us is there...... a safety net never envisioned by our forefathers..... one in which they knew had the potential to wreck a democratic society.

We reap what we sow. When we stop using our hoes and shovels for their intended purpose and instead point them at the perpetrators commiting this treason.... we shall realize true freedom.