Frances May Bring More Claims Than Charley, But Lower Severity

Preliminary reports from insurers indicate that Hurricane Frances will produce significantly more claims than Hurricane Charley, but the average claim will not be as high, according to the Des Plaines, Ill.-based Property Casualty Insurers Association of America.

“Early reports indicate damage is much more widespread due to the path and size of Frances,” PCI Senior of Claims John Eager said in a statement. “As a result, we expect to see a much larger volume of claims than we saw in the aftermath of Charley. However, damage generally is not as severe and much of the damage is flood-related.”

Eager noted that a homeowners policy generally covers water damage caused by rain coming in through damaged roofs and windows, but damage from flooding is covered by a separate flood insurance policy under the National Flood Insurance Program (NFIP).

“We want to be very cautious about estimating damages from the hurricane at this early stage,” Eager said.

“As we saw in the aftermath of Charley, initial estimates of insured losses were as high as $20 billion, when, in reality, they were closer to $7 billion. We think it’s better to wait and get it right than to speculate about damage without the facts. Solid estimates won’t be available for several days.”

Eager’s admonition against speculation did not stop catastrophe modeler Eqecat Inc. from releasing estimates Friday of insured losses ranging from $2 billion to $5 billion.

The estimate was based on revised hurricane information provided by the National Oceanic and Atmospheric Administration (NOAA), and the movement of the storm across Florida. Total economic losses could exceed $10 billion, the group said.

Though Frances caused great consternation among insurers as it neared Florida, that was when it was a Category 4 hurricane with winds of up to 145 mph.

By the time it reached land, the winds had relented to Category 1 levels of 105 mph. Frances may wind up being less expensive than Charley for that reason, in spite of being larger and longer lasting.