By Ben Berkowitz
NEW YORK (Reuters) - Hurricane Irene is expected to have caused substantial property losses, catastrophe modeling company Eqecat said on Monday, although the insurance industry quickly agreed the impact was not as bad as feared.
While firm numbers were hard to come by, industry trade groups said the losses appeared to have been less than $5 billion, much less than the $10 billion or more some were forecasting even two days before Irene hit.
Insurance shares rallied sharply on Monday, far outpacing the broader market, on relief the payouts would not be as bad as they could have been.
Even so, some analysts said the storm may have been something of a worst-case scenario for large U.S. property insurers such as Allstate Corp and Travelers Companies Inc, enough to wipe out some or all of their third-quarter earnings, but not enough to cause an industry-wide increase in prices after years of weakness.
Allstate shares rose 8.6 percent and Travelers rose 4.8 percent in afternoon trading, in line with European insurers, which rose on relief the damage from Irene was not as bad as feared. All 22 companies in the S&P insurance index outperformed the broader market.
Millions of people throughout the northeastern United States were still flooded and without electricity on Monday morning, particularly in rural Vermont and suburban New Jersey. Totaling those losses is expected to take time, as is the process of figuring out how many of the affected had government-backed flood insurance.
By some accounts, the insured losses in the Carolinas were as little as $200 million after the storm made landfall there Saturday, but impacts appear to have been far worse as the storm rolled up the coast.
"Irene is a major event and will be responsible for significant levels of insured losses to property and people," Eqecat said in a loss report early Monday morning.
It expects to have more figures later in the day.
AIR Worldwide, a competitor, is also expected to release a figure on Monday. Earlier in the day, some reports cited an AIR estimate for losses of $2 billion to $8 billion, but the company said that range was not meant for distribution and was calculated before Irene made landfall in New York on Sunday.
$10 BILLION EVENT?
Before the hurricane, some feared Irene could be a $10 billion event or more. Analysts and insurance executives suggested something above $15 billion could bring a structural change to the insurance market, pushing prices higher around the world after three years of weakness.
It seemed unlikely Irene would hit that mark, with trade groups such as the Insurance Information Institute and the Property and Casualty Insurers of America saying estimates below $5 billion sounded right.
"The impact to insurers from Irene is probably not large enough to cause increased pricing and will not result in a broad (property and casualty) cycle turn because we estimate there is still least $100 billion of excess U.S. P&C industry capital," Barclays Capital said in a note on Monday.
Between the Caribbean and the Carolinas, Eqecat has estimated losses of no more than $1 billion. Its competitor AIR Worldwide has forecast losses of $1.1 billion just for the Caribbean, though. The third key player in catastrophe modeling for the insurance industry, RMS, has not weighed in with a figure.
On Monday, RMS did say the damage so far is much more likely to be from flood and storm surge than wind -- which would, by definition, get the insurance industry off the hook for most of the losses and push the payout burden onto the National Flood Insurance Program.
The shares of the world's top three reinsurers -- Munich Re, Swiss Re and Hannover Re -- rose 3 percent as analysts said they did not expect any losses to force a change to 2011 estimates.
This year already was the most expensive for natural disasters in the history of the world, mostly because of the costs of the March earthquake in Japan.
(Additional reporting by Jonathan Gould in Frankfurt; editing by Derek Caney, Robert MacMillan and Andre Grenon)
