Rita insured losses seen up to $6 bln

09/24/2005

Saturday September 24, 5:11 PM EDT

By Ben Berkowitz

NEW YORK (Reuters) - Hurricane Rita caused anywhere from $2.5 billion to $6 billion in insured losses in eastern Texas and western Louisiana, three major catastrophe risk modeling companies said on Saturday, far less than was feared as the storm lost steam before striking land.

One of the firms, AIR Worldwide, said Rita costs will be much lower than those from Hurricane Katrina, which caused insured losses that are estimated at anywhere from $14 billion to $60 billion.

It also appeared, at least initially, to have mostly spared crucial oil refineries at a time when supplies of gasoline and other refined products are already stretched.

“The heavy commercial and industrial areas of Port Arthur and Beaumont - with their numerous refineries - were to the left of the storm’s track, where wind speeds are lower, so we do not expect to see significant structural damage to the refineries,” Jayanta Guin, vice president of research and modeling at AIR Worldwide, said in a statement.

Texas Senator Kay Bailey Hutchison told reporters in the state capital Austin that refineries in the Houston area were also likely to be back up and running fairly quickly, given the limited damage to the city.

AIR also said the areas worst-hit by Rita had fewer insured properties in general than those areas ravaged by Katrina, contributing to the lower loss forecast. There was still heavy damage, though, in communities like Beaumont, Texas, and Lake Charles, Louisiana, and the prospect of flooding as Rita stalled and dumped heavy rains on the region.

Eqecat, another of the major catastrophe modeling companies, said Saturday Rita caused insured losses from wind damage in the neighborhood of $3 billion to $6 billion. On Friday the firm had forecast that Rita could potentially be responsible for up to $18 billion in losses.

But RMS, which is the other of the major risk modeling firms along with AIR and Eqecat, said it would not issue a formal estimate this weekend because there was the potential for more damage yet to come.

“The primary reason is that the storm is forecast, as it moves inland, to slow down considerably, and in that process the rainfall-related flood impacts could be significant,” Kyle Beatty, a meteorologist for RMS, told Reuters.

Beatty said a fair ballpark estimate for Rita damage from wind and surge effects, plus physical damage to offshore oil platforms, was in the range of $5 billion. That figure excludes any impact from potential new flooding.

120 MPH WINDS

Rita slammed into evacuated towns and oil-rich swamplands of the Texas-Louisiana border early Saturday, causing widespread damage and power outages. The powerful storm hit with 120 mph (193 kph) winds and punishing rains, then weakened slightly as it moved inland.

It spared Houston, the fourth largest U.S. city, a direct hit, which had insurers and reinsurers breathing a sigh of relief Saturday.

“I think for the complex in the Houston area, I would have to assume it is going to be minor if anything, just because the storm moved far enough east,” said Bruce Jefferis, managing director of the natural resources unit at AON, the top global reinsurance broker.

But the oil city of Beaumont, Texas, and many of the largest U.S. refiners were in Rita’s path, and the extent of damage was not yet known, nor was it clear how badly Rita damaged production in the nearby Gulf of Mexico.

“I’m fairly concerned right now about what’s happened offshore, because Rita took a worse path for the offshore assets than Katrina did,” Jefferis said. “The worst part of the storm would have been on the east side, which would have been right up the concentration of the assets.”

Texas emergency management officials said they had airborne assessment teams ready to go out and inspect damages as soon as winds died down. At least one energy expert feared the worst, though, given Rita’s track and previous intensity.

“It was right up production alley,” said Harry Quarls, senior managing director of the global energy practice at Booz Allen Hamilton. “It was a Category 4 and 5 (storm) when it was going through.”