Risk Management Solutions estimates over $100 billion in economic loss from Katrina, according to Insurance Journal, which said: "Hurricanes of category 4 or 5 strength are well-understood to occur in this region of the country, yet the levee system in New Orleans was designed only to protect against a category 3 strength storm. The insufficient level of flood protection offered by the city's levees has been exacerbated by shortcomings in preparedness."
RMS Totals Economic Loss for Katrina at $100 Billion
One insurance question is how many events are involved in this disaster. Is the levee break part of the same event or occurrence as the windstorm? Following 9/11, the extent of property insurance coverage on the World Trade Center itself depended on the interpretation of policy language that determined the number of occurrences. The decision went to the Court of Appeals and took years to resolve.
In the end, some policies were interpreted to cover each of the two airstrikes as a separate occurrence, with a separate amount of coverage for each. Other policies with slightly different language were interpreted so that the coordinated attack on two towers was one occurrence. The decision had a $2.2 billion impact on the insurers that used the different language. See: Unintended Consequences: WTC Coverage Dispute - Phase Two (November 30, 2004) and Unintended Consequences: "Occurrence" under WTC v. HFIC (December 13, 2004) and WTC v. Hartford Fire, 345 F.3d 154 (2d Cir. 2003).
Insurers, reinsurers and courts will be examining the commercial property policies of businesses, apartments, hotels and public buildings for a long time, resolving these issues.
Posted by dougsimpson at September 3, 2005 06:23 AM