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Pricetag for Ike: $15 billion, insurers say

By Purva Patel
January28,2010
Posted: January 28, 2010, 9:18 PM CDT
Original Printed at http://www.chron.com/disp/story.mpl/hurricane/ike/6839732.html

Hurricane Ike caused more than $15 billion in damages nationwide, making it the most expensive weather catastrophe in Texas and the third-costliest hurricane to strike the United States, according to insurance industry officials.

That number doesn't include losses to those who didn't have insurance.

The Insurance Council of Texas released the figure Thursday, noting that about $9.8 billion of the losses were for windstorm damage alone in Texas. An additional $2.2 billion in losses in the state were covered by the federal flood insurance program.

In addition, the U.S. Department of Housing and Urban Development, in a chart accompanying a Dec. 18 letter to Gov. Rick Perry, estimated the state's total “unmet needs” for homes and small businesses at $2.9 billion. The estimate, based on data from the Federal Emergency Management Agency and the Small Business Administration, includes damages not covered by insurance or FEMA grants.

The bulk of insurance claims — almost $12 billion — came from Texas. But the storm caused extensive wind and flood damage in other states — including more than $1 billion in insured losses in Ohio — and a total of about $2 billion in wind damage in the other states, according to ISO, a company that provides insurance industry data.

In dollar figures, losses from Ike rank third, behind Hurricane Katrina, which devastated New Orleans in 2005, and Hurricane Andrew, which pummelled South Florida and Louisiana in 1992.

Ike replaces Tropical Storm Allison, which struck the Houston area in June 2001 and caused $3.5 billion in insured losses, as the most expensive weather-related catastrophe in the state.

Property in the hardest-hit areas of Texas — Bolivar and Galveston — was usually covered by the Texas Windstorm Insurance Association, which sells insurance to those who can't find it in the private market.

The state-created but privately run insurer, which is still receiving and paying claims, projects its losses from Ike will total $1.8 billion. The association also estimates that about 80 percent of its policyholders whose properties were razed to the slab didn't have any or enough flood insurance.

Consumers for many companies are already feeling the impact of Ike's losses as their premiums climb.

The state's largest insurers, State Farm, Farmers and Allstate, have all filed rate increases in the past year.

“As you can imagine, some companies feel fine with where their rates are and some have asked for a small increase and some have asked for a larger one,” said Mark Hanna, a spokesman for the Insurance Council of Texas. “Every individual company is different.”

Insurers can't, by law, raise an individual's rates for filing a hurricane-related claim, said Jerry Hagins, a spokesman for the Texas Department of Insurance. But they can raise everyone's. That's because they use historical losses to project future losses and the rates they'll need to stay profitable.

The size of the storm can also influence the models that insurers use to project the frequency and intensity of future catastrophes, which is then factored into rate projections, Hagins said.

Insurers are also working the higher cost of reinsurance — coverage they buy for themselves — into rates, said Deeia Beck, head of the Office of Public Insurance Counsel, which represents consumers in rate hearings before state insurance regulators.

Chronicle reporter Mike Snyder contributed to this report.

purva.patel@chron.com