Katrina Damage Estimates Now $25B

Hurricane Katrina, which walloped New Orleans and other Gulf Coast cities, could cost the insurance industry up to $25 billion in claims, according to updated reports Tuesday from risk assessment firms.

That means Katrina could prove more costly than record-setting Hurricane Andrew in 1992, which caused some $15.5 billion in insured losses. Adjusted for inflation, Andrew's cost would be nearly $21 billion today.

"The flooding is everywhere and I'm not talking about just New Orleans. I'm talking about all through Mississippi and Alabama," Federal Emergency Management Agency director Mike Brown told CBS News Early Show co-anchor Julie Chen. "So this storm is really having a catastrophic effect throughout the South right now."

AIR Worldwide Corp., a risk modeling firm based in Boston, said its revised projection anticipates insured losses in a range of $17 billion to $25 billion. On Monday, the company said its initial assessments suggested property and casualty losses in a range of $12 billion to $26 billion.

A similar projection came from another firm, Risk Management Solutions of Newark, Calif., which projected insured losses from the hurricane of $10 billion to $25 billion.

The figures do not cover property that isn't insured, which could add millions to the total.

Other companies have put out lower estimates for the impact of Katrina on the insurance industry, and all emphasize that data is preliminary because research teams have been unable to get into hard-hit areas to do onsite inspections.

President Bush has declared Louisiana, Mississippi and Alabama as disaster areas, making residents eligible for federal assistance if they don't have insurance or damages exceed their insurance coverage.

Jayanta Guin, AIR Worldwide vice president of research and modeling, said the firm revised its insured loss estimates "based on the storm's actual track and additional meteorological information, including actual wind speed reports."

He said while Katrina didn't score a direct hit on New Orleans, moving on land to the east of the low-lying city, its winds "impacted several densely populated areas."

Earlier Tuesday, Germany's Munich Re, the world's biggest reinsurance company, put its initial estimate for total insured damage at between $15 billion and $20 billion and its own exposure at up to $489 million, but said that figure could change as more information emerges.

Another risk modeling firm, Eqecat Inc., which is based in Oakland, Calif., initially estimated damages from Katrina at up to $30 billion, but it lowered its projections twice after the storm struck east of populous New Orleans and was quickly downgraded as it moved inland.

Eqecat's latest projection is a range of $9 billion to $16 billion.

Last year, the four separate hurricanes that slammed Florida and other East Coast states cost insurers nearly $23 billion. The most devastating, Hurricane Charley, racked up insured losses of $7.5 billion last August.

Major insurance companies — already dealing with the fallout from Katrina in southern Florida, where the storm passed late last week — on Monday began turning their attention to Louisiana and Mississippi.

The largest property and casualty insurance companies operating in the southern states are State Farm Insurance Cos. of Bloomington, Ill., and Allstate Corp. of Northbrook, Ill.

Phil Supple, spokesman for State Farm, said the company has teams ready to move into New Orleans and Gulf Coast cities after Katrina passes to begin processing insurance claims.

"We have to wait for civil authorities to open areas so we can get in and assess damages," Supple said.

Allstate, the No. 2 home insurer in those states, also has teams prepared to move in after the storm. Spokesman Mike Trevino said the company has mobile units fitted with generators and satellite dishes so they can deal with claims in hard-hit areas where electricity and phone service isn't available.

"At this early stage, our advice to everyone is to stay safe," Trevino said. "And once people are able to get back into the area, they need to be very careful about going into homes, especially if there appears to be structural damage."

Investors worried about potential damage payouts sent insurance companies stocks down Monday.

Robert Hartwig, chief economist with the Insurance Information Institute in New York, said that "what we're looking at is one of the top two or three most expensive storms in U.S. history." The III is a research center supported by property and casualty insurers that provides information about home, auto and other insurance products to the public.

He said damage from Katrina was harder to project than that of earlier hurricanes because New Orleans has a significant number of businesses, such as tourist hotels and restaurants, that could suffer both physical damage as well as so-called business interruption losses.

Hartwig said that in the four hurricanes that hit Florida last year, one-third of the insured losses were for commercial properties that suffered physical damage or were shut down for an extended period for repair.