&KRD_ RM=7oovospursqnvoorpqnnnnnnnn|Lion|Y

Estimate: Hurricane Charley to cost insurers $7.4 billion

Associated Press

NEW YORK - Hurricane Charley will likely cost insurers at least $7.4
billion, according to the Insurance Institute, an industry trade group
that based its estimate on initial claims data from Florida residents
and businesses.

The Insurance Institute made the estimate after conversations with the
biggest insurers serving the state, said Robert Hartwig, the group's
chief economist. Earlier forecasts that said losses could be as much
as $10 billion to $14 billion were derived from computer models.

"(The estimate) won't go down, and I hope it won't go up too much,"
said Tom Gallagher, Florida's Chief Financial Officer.

Hurricane Charley likely will be the nation's fourth most costly
disaster for insurers and the second most expensive hurricane,
according to the Institute.

Insurers paid out $32.5 billion in claims in the aftermath of Sept 11,
making it the most expensive disaster in U.S. history. Hurricane
Andrew in 1992 was second with a $15.5 billion payout, or $20.3
billion when adjusted for inflation in 2003 dollars. The 1994
Northridge earthquake cost insurers $12.4 billion, or $15.5 billion
when adjusted for 2003 dollars. Hurricane Hugo in 1989 is fifth with a
$4.2 billion payout, or an inflation-adjusted $6.2 billion.

Hartwig said Hurricane Charley proved to be was a weaker storm that
cut a more narrow path in areas less affluent than those struck by
Hurricane Andrew. Hartwig expects about 300,000 claims to be filed
from Hurricane Charley - about half the amount filed from Hurricane
Andrew, which forced 11 insurance companies to go insolvent.

Insurers changed their policies in the wake of Hurricane Andrew,
Hartwig said. Instead of a set dollar deductibles, policies have
deductibles based on a percentage of the insured property, which
generally require the insured to pay a larger portion of the damage.

In addition, the blow for insurers should be cushioned by the
multibillion-dollar Hurricane Catastrophe Fund, which the state
established after Hurricane Andrew. The fund provides reinsurance, or
insurance for the companies themselves, to help them pay for major
disasters. Built up by payments from insurers that operate in the
state and a variety of other sources, it has $6 billion cash plus the
capability to issue an additional $9 billion in bonds.

Under the $7.4 billion estimate, insurers would need to take about $2
billion from the catastrophe fund to pay claims, Gallagher said.

"The companies should have the money ... to pay everybody's claims,"
Gallagher said.

State Farm has received 54,816 property claims and 7,134 auto claims,
according to Fraser Engerman, spokesman for Bloomington, Ill.-based
State Farm Mutual Insurance Cos. He said the insurer's subsidiary,
State Farm Florida, would pay the first $200 million in losses, but
that there was no estimate on total losses yet. The rest would be paid
by the Hurricane Catastrophe Fund and reinsurers.

Allstate said it would pay the first $286 million of catastrophic
losses in Florida, with the hurricane fund covering 90 percent of
losses above that total. The nation's biggest publicly traded insurer
said it has not estimated potential losses, which it acknowledged
could be material to its operating results but should not have a
material effect on its financial condition.