Hurricane Katrina likely will cause the largest insured loss from a single event since the attacks of Sept. 11, 2001, and the largest U.S. hurricane loss since Hurricane Andrew in 1992, Fitch Ratings says. Insurance experts estimate losses could go as high as US$25 billion.

Fitch Ratings, an international rating agency, suggests the magnitude of the loss from Katrina likely will be considerably greater than any of the individual losses from the four major hurricanes that reached land in 2004. At the high end of the range of current estimates, Katrina would exceed the combined insured losses from the 2004 hurricane season and would represent the largest insured hurricane loss ever.

The insurance loss due to Katrina will be material to both the primary insurers located in the U.S. and to the reinsurance industry, much of which is domiciled outside of the U.S.

At this point, two major hurricane-modelling firms have released preliminary estimates of the insured losses from Katrina. Eqecat estimates the insured loss to be in the range of US$12 billion to US$25 billion. Risk Management Solutions Inc. estimates the loss to be US$10 billion to US$25 billion.

“Total losses — insured losses plus uninsured losses — are often double the insured loss and Fitch notes that flood losses are generally not covered by homeowners’ policies,” said Donald Thorpe, senior director, Fitch Ratings. “The range of loss estimates is necessarily wide because this event is still ongoing. Fitch expects loss estimates to be refined once the areas affected are safe enough to physically inspect damage and when the National Weather Service publishes detailed information about the storm track, central pressure and wind speeds.”

These insurance losses are in addition to the damage caused by Katrina’s earlier sweep into part of Florida late last week that caused an estimated US$600 million to US$2 billion in insured losses. There is also the possibility Katrina has caused significant damage to offshore oil drilling facilities in the Gulf of Mexico.

Fitch currently expects the spread of loss through the insurance industry to be different than the 2004 hurricane season, with reinsurers taking a greater proportion of the loss than in 2004. This is because the insured loss from Katrina will be from a single event, which means primary insurance companies will share losses with their reinsurers once losses meet their respective deductibles. This contrasts with 2004, when insured losses were the result of four hurricanes, which meant primary insurers had to pay four deductibles.

State Farm Mutual Group is the biggest Louisiana homeowners’ insurer with a 34.7% market share, followed by Allstate Insurance Co. Group with 20.8%, and Louisiana Farm Bureau Mutual Insurance Co. at 6.0%, Fitch reports. St. Paul Travelers Companies is the top commercial property insurer at 13.5% of the market share, followed by State Farm with 12.9%, and Zurich Insurance Co. Group at 10.6%.