Gustav bears down on U.S. East Coast: the Hurricane Scenario: Gustav, an intense Cat 4 storm, wreaks supreme havoc upon the Eastern Seaboard, leaving a trail of losses from Key West to Cape Cod

Risk & Insurance, April 15, 2004 by Auguste Boissonnade

Despite heavy rains--more than 10 inches of rain over 24 hours--and high winds, the dikes built around Lake Okeechobee after the 1928 hurricane hold. There is no catastrophic inland flooding to speak of. States north of Florida suffer damage, mainly due to heavy rains and gusty winds, which knock down trees and inflict property damage. One million residents are affected in these states, including many hl Rhode Island and Massachusetts where 300,000 buildings suffer mostly minor damage. While improved tree-clearance since 2003's Hurricane Isabel has reduced the impact of power outages in the Carolinas and the Mid-Atlantic states, several million people are without power in New England.

Building damage and flying debris from Gustav are directly responsible for 25 deaths, while another 60 fatalities are linked to the hurricane. The number of casualties is much lower than in the 1928 storm, in which more than 1,800 people died. Total U.S. economic losses reach an estimated $75 billion, with 95 percent of the losses occurring in Florida.

Total private insurance claims are reported to be about $48 billion, with insurance companies on the hook for about $45 billion of that $48 billion. Roughly two-thirds of those claims reflect residential losses; the large majority being wind-related. About $500 million in flood losses is paid out to businesses covered by flood insurance. Residential, coastal and inland flood losses are reported to be on the order of $1 billion, the majority of which are covered by the federal flood insurance program. Emergency and clean-up costs are estimated to be about $2 billion. Losses to agriculture are several billions of dollars, part of it covered by insurance.

Losses from Hypothetical Hurricane Gustav

            Typs of Loss                Total Loss     Insured Losses

Property and infrastructure damage      $57 billion     $37 billion
Workers' compensation, life and
  health costs                          $100 million    $50 million
Direct costs of business interruption   $15.5 billion   $8 billion
Other costs (e.g. emergency response)   $2 billion      --

Total Direct Costs:                     $74.6 billion   $45.1 billion

Total number of people killed:                85
Total hospitalized with serious
  injuries:                                  150
Total treated at outpatient clinics:         500

Source: Risk Management Solutions

RELATED ARTICLE: Mother nature's deadly spins.

Virtually every coastal area along the Gulf and eastern coasts of the United States, along with Hawaii, have the potential to be struck by a hurricane but some coastal areas are more at risk than others. The patterns of hurricane activity can be observed from history and explained by the physics and climatology of hurricane formation and motion. In an average year, three tropical storms hit the continental United States. About two of every three of these tropical storms come ashore with hurricane strength.

Loss reconstructions show that 80 percent of all historical hurricane losses resulted from just 65 hurricanes-a relatively small proportion of all hurricanes to hit the United States.