Hurricane Ivan Hurtles Through Gulf of Mexico

Insurers continue to assess damage from Frances and Charley
As Hurricane Ivan churned across the Gulf of Mexico, storm-weary residents along the Gulf Coast from Morgan City, La., to the Florida Panhandle prepared to evacuate their homes and businesses in advance of the massive storm.

Ivan, once a Category 5 hurricane, was downgraded to a Category 4 level with top sustained winds of 140 mph after pounding the western tip of Cuba with 25 foot waves and strong winds, causing substantial damage. Although no deaths were reported in Cuba at press time, 68 people were said to have died in other areas of the Caribbean as a result of the storm.

On Sept. 14 New Orleans Mayor Ray Nagin declared a state of emergency for the city, which is highly vulnerable to hurricanes, being flanked by the Mississippi River and Lake Ponchartrain and located near the Gulf of Mexico. Many parts of the city also sit as much as 10 feet below sea level.

City services were suspended—except those of the New Orleans Police Department (NOPD) and New Orleans Fire Department (NOFD)—and non-essential public workers were asked to return home to make their storm preparations. Garbage pickup was suspended and residents were asked to bring trash cans, empty or not, from the curb and safely secure them. Classes in all public, parochial and private schools were cancelled and all New Orleans universities were closed.

Mayor Nagin declared a state of emergency in New Orleans at a press conference co-hosted by Jefferson Parish President Aaron Broussard and other elected officials in the New Orleans region. In addition, Mayor Nagin announced a recommended evacuation for all Orleans Parish residents.

Insurers, meanwhile, are still trying to respond to claims left behind by Hurricanes Frances and Charley. Des Plaines, Ill.-based Property Casualty Insurers Association of America (PCI) reported that preliminary indications from insurance companies showed that Frances will produce significantly more claims than Hurricane Charley, but the average claim will not be as high.

“Early reports indicate damage is much more widespread due to the path and size of Frances,” PCI Senior Director 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,” said Eager. “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 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’s (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.