August 31, 2005 by Canadian Underwriter
Swiss Re announced today that based on its preliminary estimate, it expects its claims related to Hurricane Katrina to be in the range USD 500 million (CHF 625 million) before tax.
Swiss Re expects Hurricane Katrina to cost the insurance industry in the region of USD 20 billion, making it the most costly hurricane after hurricane Andrew in 1992, when insurance claims reached USD 22 billion (indexed to 2005). Based on preliminary estimates Swiss Re expects its claims to be around USD 500 million. The complexity of damage caused by the storm and subsequent flooding means estimates have a more than usual degree of uncertainty.
Swiss Re’s natural catastrophe claims year to date are estimated to be CHF 1.0 billion. This estimate includes, in addition to Katrina, the significant events of January’s European storm Erwin, July’s Hurricanes Dennis and Emily and the flooding in India as well as the floods in Central Europe in August. These estimated claims costs can be measured against Swiss Re’s natural catastrophe premiums earned of CHF 1.4 billion for the full year 2005.
Hurricane Katrina first made landfall as a category 1 hurricane in Florida on 25 August. Having gathered strength over the Gulf of Mexico, Katrina again made landfall on 29 August in Louisiana, 110 km south east of New Orleans, as a strong category 4 hurricane and went on to cause vast devastation in Mississippi, Alabama and Tennessee.
Winds of up to 240 km/h followed by heavy rainfall left behind destruction to industry, infrastructure and private property. Latest estimates indicate that several hundred people have lost their lives. Around 80% of New Orleans or some 200,000 buildings have been flooded with some areas seven metres under water. More than 1.3 million homes were left without power in the affected areas.
Along the coast east of New Orleans, huge areas have been impacted by the storm surge which led to flooding and widespread damage. Harrison County in Mississippi bore the brunt of the storm with the towns of Gulfport and Biloxi suffering particularly badly.