Hurricane Irene's estimated cost to insurers fell to about $2.6billion in the U.S. as the storm lost strength en route to NewYork, according to Kinetic Analysis Corp., a firm that predicts theeffects of disasters.

That compares with a projection last week from the SilverSpring, Maryland-based company of as much as $14 billion. Totaleconomic losses, including those that aren't insured, may be about$7 billion.

“Insurers may get off pretty easy,” Charles Watson, Kinetic'sresearch and development director, said in a phone interview fromSavannah, Georgia. “This one's not the straw that broke the camel'sback.”

Estimates of losses declined as Irene weakened from a hurricaneto a tropical storm. Insurers may face losses of $200 million to$400 million in North Carolina and South Carolina, according torisk-modeling firm Eqecat. That's less than the $1.4 billion ininsured losses North Carolina sustained from Hurricane Floyd in1999, one of the costliest storms to hit that state, according tothe Insurance Information Institute.

“The first initial estimates were that the storm was going to bea lot more severe,” Tom Larsen, senior vice president at Oakland,California-based Eqecat, said in a phone interview. “Sometimes theylook big and they're not, and sometimes they blow up really quicklyand become a major loss.”

Volatility in Projections
Eqecat and othermodeling firms hadn't release estimates for mid-Atlantic states,New York and New England as of 6 p.m. local time yesterday. Lossesin those regions could create volatility in the projections, Larsensaid.

Irene struck New York City yesterday at around 9 a.m. local timewith winds of 65 miles (105 kilometers) per hour, before pushinginto New England. The storm sent rivers to almost-record heightsand knocked out power to more than 4 million customers in 12 statesand the District of Columbia. At least 18 people died from PuertoRico to Connecticut.

Much of the insured flood damage to homes along the coast willbe shouldered by a government-run program, said Kinetic's Watson.Standard homeowners' policies sold by private carriers don'tinclude that protection. The government also will face costs tiedto clearing debris and fallen trees.

“Cleanup is going to be about half of the real cost of thestorm, and that's a government expense,” Watson said.

Forced to Evacuate
Insured losses mayinclude hotel and living expenses for policyholders who were forcedto evacuate, according to AIR Worldwide, a Boston-based riskmodeler. More than 2 million people were ordered to leave low-lyingareas before the storm. The majority of them were in New York andNew Jersey, where hotel rates and living expenses are among thehighest in the U.S., AIR said.

Business-interruption claims also can add to insurers' costs.More than 10,000 flights were canceled as officials shutteredairports in the New York metropolitan area, the busiest U.S. travelmarket. The National Association of Insurance Commissioners calledoff its Summer National Meeting in Philadelphia, scheduled to begintoday, after members scrapped travel plans.

State Farm Mutual Automobile Insurance Co., the largest U.S.house and car insurer, said more than 3,000 homeowners' claims andabout 670 auto claims had been filed in North Carolina, Virginia,Pennsylvania, New Jersey, New York and Connecticut as of 3 p.m.yesterday. Data from Delaware and Maryland wasn't immediatelyavailable.

Power Failures
The insurer was receivingreports of downed trees, siding and roofing materials blown offhouses, power failures and “a lot of claims for loss ofrefrigerated food,” said Jon Hannah, a spokesman for Bloomington,Illinois-based State Farm.

Allstate, the second-largest U.S. home and auto insurer, saidthat claims adjusters near Greenville, North Carolina saw snappedtrees, according to April Eaton, a spokeswoman. Chubb Corp. hasstarted receiving calls from policyholders, Chubb's Mark Schusselsaid yesterday.

Damage in the U.S. from Irene will add to losses alreadysustained in the Caribbean. The storm whipped through the Bahamasbefore heading to North Carolina. AIR estimated insured losses of$500 million to $1.1 billion in the Caribbean, while Eqecat saidlosses may be $300 million to $600 million.

Insurers have faced costs tied to other catastrophes this year,including an earthquake in Japan, tropical cyclone in Australia andtornadoes in the U.S. Natural disasters caused more than $2 billionin claims at Allstate and erased second- quarter profit. TravelersCos. was also unprofitable in the period. Disasters outside theU.S. led to a first-quarter underwriting loss at Warren Buffett'sBerkshire Hathaway Inc.

“The industry as a whole is having a catastrophe-prone year,”said Eqecat's Larsen. “This is just one more to pile on top.”

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