AIR Worldwide Estimates Insured Losses to Onshore U.S. Properties from Hurricane Ike Between $8 Billion and $12 Billion

AIR estimates insured losses to offshore assets in the Gulf of Mexico will be between $600 million and $1.5 billion

BOSTON, Sept. 13, 2008—Catastrophe risk modeling firm AIR Worldwide Corporation estimates that insured losses to onshore properties in the United States from Hurricane Ike are between $8 billion and $12 billion, with an expected loss of $10 billion.

Hurricane Ike made landfall at Galveston, Texas, at 3:10 am EDT, Saturday, Sept. 13, as a strong Category 2 hurricane. Maximum sustained winds at landfall were 110 mph, just shy of Category 3 on the Saffir-Simpson intensity scale.

Early damage reports include the destruction of several buildings lining the seawall. Several house fires in Galveston burned unchecked as firefighters were prevented from reaching them because of flooded streets, and homes across the island are reported to have been damaged by Ike's winds.

“As expected, Houston's high-rise buildings are reported to have sustained major damage to glazing, much like the damage caused by 1983's Hurricane Alicia,” said Dr. Peter Dailey, director of atmospheric science at AIR Worldwide. “Hurricane Ike, which was an extremely large storm at landfall, has been weakening only slowly and has maintained a wide swath of damaging winds. AIR expects wind damage to be widespread, not only along the coast but also extending well over 200 miles inland from Galveston.”

AIR expects significant damage to mobile homes and light metal construction such as warehouses. Ornamental features, such as those found on many fast food restaurants, are likely to sustain significant damage.

“Single-family homes away from the immediate coast are likely to experience damage to roof coverings and non-structural elements,” Dailey continued. “Closer to the coast, Ike's winds may breach roofs or windows, leading to structural damage.”

As indicated, AIR expects significant damage to glazing in Houston's high-rise commercial buildings. However, because such buildings are well-engineered and built to stringent code, AIR does not expect significant structural damage. On the other hand, while high-rise apartments and condominiums usually receive a similar degree of engineering attention as high-rise commercial construction, they often have building components that make them more susceptible to windstorms, including balconies, awnings, and double sliding glass doors.

Flooding continues to be a major concern despite the fact that the 20-foot storm surge that the National Hurricane Center had warned of failed to materialize. According to information released Sept. 13 by the National Weather Service, the highest recorded surge was 13.5 feet, seen at Sabine Pass, Texas. Galveston Island recorded an 11-foot surge.

“Waves have been crashing over the seawall and flooding has been reported across Galveston Island, including in the city's downtown,” Dailey said. “Both the east and west ends of Galveston Island are reported to be under water. AIR estimates that the total value of insured properties on Galveston Island alone is about $12 billion, divided roughly equally between commercial and residential construction.”

It should be noted, however, that much of the flood damage will not be covered by the private insurance industry.

In the coming days, AIR will be sending teams to the affected areas to survey the damage.

AIR estimates insured losses to offshore assets in the Gulf of Mexico will be between $600 million and $1.5 billion with an expected mean of $1 billion.

Hurricane force winds can cause damage to topside equipment. However, wave height – or more specifically, the difference between the total wave height and the height of the structure’s lowest deck – is the primary driver of structural damage to offshore assets.

AIR maintains a very detailed industry exposure database of offshore assets in the Gulf of Mexico. This database includes not only location and type of offshore platform but also includes the physical characteristics of each asset that are important for estimating physical damages and loss of production. The model has been thoroughly validated with the historical data from hurricanes Katrina, Rita, and Ivan.

Source: AIR Worldwide Corporation

Posted: Monday, September 15, 2008 12:00:00 AM. Modified: Wednesday, September 17, 2008 11:33:17 AM.

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