Insurance Payments To Victims Of Hurricane Charley Expected To Reach $7.4 Billion, Says Insurance Information Institute — Second Most Costly Hurricane in U.S. History

NEW YORK, August 18 � Insurers are likely to pay out an estimated $7.4 billion to help people whose homes, businesses and personal possessions were damaged by Hurricane Charley, according to the Insurance Information Institute (I.I.I.).

The storm, which swept across Florida and into the Carolinas, ranks as the second most costly in U.S. history surpassed only by Hurricane Andrew which caused $15.5 billion in insured losses in 1992 , said Robert Hartwig, the I.I.I.�s chief economist.

Hartwig explained that the overall economic losses are always higher than insured losses. Economic losses not part of the insured loss estimate include, for example, lost wages and revenues, tax receipts, additional government outlays for disaster relief and damage to property that was uninsured. The I.I.I. estimate does not include crop or flood losses, which are insured under government programs.

Hartwig pointed out that the $7.4 billion in insurance payments to policyholders would help stimulate the economies of the most devastated parts of the state as rebuilding activity gets underway.

The I.I.I. noted out that the largest insurer of hurricane damage in Florida is not a private insurance company, but Citizens Property Insurance Corporation, a state-established program which provides insurance to consumers who can�t find coverage in the private market.

The I.I.I. also noted that hurricane deductibles in coastal Florida generally range from two to five percent of the insured value of the property, rather than a dollar deductible. Percentage deductibles are common in hurricane-prone areas along the Gulf and Atlantic coasts.

Hartwig said percentage deductibles allow insurance companies to make homeowners insurance more affordable and widely available.

�While formidable, Charley falls generally within the range of catastrophic risk that insurers anticipated and built into insurance premiums for homeowners and businesses in hurricane prone areas. I would not expect the storm by itself to have a significant effect on the availability or cost of insurance in Florida,� he said.

Beyond the wind damage to homes, commercial properties and automobiles, the widespread mandatory evacuations in storm-damaged areas of the state will trigger some business interruption coverage as well.

The I.I.I. also said that while standard business and homeowners policies will cover the wind damage from Hurricane Charley, standard policies do not cover flood damage. Flooding is covered under policies written by the National Flood Insurance Program (NFIP), an insurance program managed by the Federal Emergency Management Agency (FEMA).

Below is a chart of the ten costliest hurricanes in history, ranked by the level of insured loss.