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RMS Estimates Insured Losses of $4 billion to $10 billion for Hurricane
Gustav
Newark, Calif – September 1, 2008 – Insured
losses from Hurricane Gustav could range between $4 billion and $10
billion, according to initial estimates based on the latest information
from catastrophe risk experts, Risk Management Solutions (RMS). This
includes both on and offshore losses from wind and storm surge, and does
not take account of any potential damage to the levees in New Orleans,
or flooding from excessive rainfall which may occur in the following
days.
RMS estimates the range for offshore damage to oil
platforms and wells, as well as production interruptions caused by wind
and waves, could be from $1 billion to $3 billion. Insured losses for
onshore damage to residential and commercial properties, as well as
business interruption, are estimated to be between $3 billion and $7
billion. These figures relate to the private insurance market and do not
include coverage from the National Flood Insurance Program.
“Even though Gustav has now made landfall, the
situation remains precarious and a number of factors could push the
insured loss estimate in either direction,” said Dr. Christine Ziehmann.
“Offshore damage was not as extensive as originally anticipated, as
Gustav weakened from a category 4 hurricane to a category 3 storm before
blustering into the platforms. The platforms tend to be fairly resilient
to category 3 level winds, so the structural damage and impact on
production will be relatively low.”
She added: “The levees in New Orleans are under
pressure as the storm surge is causing water to swell and overtop the
flood defenses. The United States Army Corps of Engineers has been
rebuilding and strengthening the defenses since Hurricane Katrina, but
is only a quarter of the way through its ambitious plan. It remains to
be seen how the levees will hold up under the strain. There is also a
chance that the hurricane will stall, which is likely to result in
extreme rainfall and this would drive up the losses.”
While Gustav has impacted a similar area to Katrina,
there are a number of differences between the two storms. Katrina was a
category 5 storm before making landfall, compared to category 3 for
Gustav, and the central pressure – another indication of a storm’s
intensity – was much lower for Katrina. This low pressure – the third
lowest ever recorded at landfall – contributed to the severity of the
storm surge.
While the damage wreaked by Gustav unfolds, Tropical
Storm Hanna has now developed into a category 1 hurricane, and has
become the fourth hurricane of the season. “2008 is turning into a
active year for hurricanes, which is what we would anticipate in this
new period of heightened activity which we've been experiencing since
1995.”
RMS is continuously monitoring the situation and will
update its analysis as the situation unfolds.
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