Insurers to pay billions for Rita, only a fraction of Katrina

Insurers including Allstate Corp. and St. Paul Travelers Cos. may pay $2.5 billion to $7 billion in claims from Hurricane Rita, a fraction of what Hurricane Katrina probably cost.

Estimates are low for a storm of Rita's strength because it came ashore over Louisiana's sparsely populated western coast, damage modelers said. Risk Management Solutions Inc. estimated $4 billion to $7 billion, Eqecat Inc. projected $3 billion to $6 billion and AIR Worldwide Corp. forecast $2.5 billion to $5 billion.

At $7 billion, Rita would cost about a third of what some analysts had expected and about as much as Charley and Ivan, two of the record four hurricanes to hit Florida last year. Claims from Katrina may reach $40 billion to $60 billion, making it the most expensive disaster in the industry's history.

"This does not add a great deal of pressure to insurance markets," said Bob Hartwig, chief economist of the Insurance Information Institute, an industry group in New York. Insurers "had already taken it on the chin with Katrina."

With winds of 120 mph, Rita made landfall near the Louisiana-Texas border as a Category 3 hurricane on the Saffir- Simpson scale Saturday. It had been the maximum Category 5 earlier. The storm's turn north Friday over the Gulf of Mexico changed a projected course that may have been devastating for Houston's oil-refining hub.

"It appears that most of the refineries weathered the storm," said Andy Lipow, president of Houston consultant Lipow Oil Associates LLC.

Oakland, Calif.-based Eqecat estimated $9 billion to $18 billion of claims when Rita was still in the Gulf, assuming it would be stronger at landfall and sweep over more densely populated areas. Rita on Sunday was a tropical depression with winds of 20 mph, the Hydrometerological Prediction Center said.

Rita disrupted power to 1.2 million people and flooded communities in Louisiana and Texas. Thousands of Houston residents started to return home Sunday. As many as 3 million people in Texas and Louisiana were ordered to evacuate ahead of the storm.

Investors had been valuing insurance stocks as if there would be $10 billion to $20 billion in insured losses from Rita, Wachovia Corp. analyst Susan Spivak said in a Thursday report. A.G. Edwards & Sons Inc. analyst Paul Newsome had expected $10 billion.