RMS: Katrina Could be Even More Devastating than Hurricanes Camille and Betsy

Based on the current track and forecast intensity (as of Sunday afternoon), insured losses from Hurricane Katrina’s second landfall on the Gulf Coast of the U.S. could be even more devastating than previous historical storms affecting the region, as announced by Risk Management Solutions (RMS), a provider of products and services for the management of catastrophe risk.

Since the first landfall on Friday, Aug. 26, Hurricane Katrina continued to strengthen in the Gulf of Mexico and was Sunday declared a category 5 hurricane. Sea surface temperatures near the coast of the Mississippi River Delta are 2 to 4 degrees Celsius above normal, which combined with the other influencing factors, indicates that Hurricane Katrina is likely to be at least a category 4 at landfall.

The forecast for Katrina continues to tighten around an eastern Louisiana or far western Mississippi landfall on the morning of Monday, Aug. 29. Several heavily populated cities are within the possible landfall area, but landfall on or near New Orleans is creating the greatest concern for emergency management officials and the insurance industry.

According to the 2005 RMS U.S. Industry Exposure Database, insured value in Orleans parish alone is nearly $40 billion, and total value in the 7 parishes surrounding the city is over $110 billion. This property is not only susceptible to wind damage, but severe flooding that could result from storm surge breaching the levees that surround New Orleans.

This region has been hit by several major storms over the past century, including Hurricane Betsy in 1965, Hurricane Camille in 1969, and Hurricane Ivan just last year. Hurricane Betsy made landfall as a category 4 storm just west of Grand Isle, La. and passed approximately 60 miles west of New Orleans as it tracked inland.

When considering modern property exposure and population density, RMS estimates insured losses for Betsy today would be over $8 billion in Louisiana from wind alone. In 1969 Hurricane Camille made landfall as a category 5 hurricane, second only to the 1935 “Labor Day” hurricane as the most powerful storm ever to reach the U.S. coast. Camille passed approximately 50 miles to the east of New Orleans into western Mississippi, devastating the region and leaving tens of thousands homeless.

RMS estimates that a repeat of Hurricane Camille today would result in nearly $9 billion in insured losses from wind damages alone. The additional impacts from storm surge and damages to the oil and gas industry in the Gulf would amount to billions of additional losses if these events were to reoccur today.

In addition to Betsy and Camille, last year’s Hurricane Ivan provides the best historic benchmark of Katrina’s potential impacts to the Gulf of Mexico oil and gas industry.

Hurricane Ivan passed through the Gulf of Mexico as a Category 4 hurricane with peak wind gusts of 140 mph, producing insurance industry losses in excess of $2 billion. Sixty to seventy-five percent of this was due to the substantial losses of production. These losses were driven largely by underwater mudslides affecting pipelines in the Mississippi Delta region. Katrina is currently forecast to be more intense than Ivan and have a more direct impact on the dense oil platform and pipeline fields near the mouth of the Mississippi river, and therefore insurance losses could significantly overshadow the losses from Hurricane Ivan.

“It is important to note that while these historical events provide useful benchmarks, neither of them made a direct landfall on New Orleans,” said Kyle Beatty, RMS meteorologist. “If Katrina does directly hit New Orleans as a category 4 or 5 hurricane, the impact and financial loss will be far more devastating.”

Topics Catastrophe USA Natural Disasters Profit Loss Mississippi Hurricane Mexico