Hurricane Ike's toll in Texas may cost insurers $18 bn

Hurricane Ike, the storm that came ashore in Texas yesterday, may cost insurers $6 billion to $18 billion, according to firms that specialise in gauging the effects of disasters.

The highest estimate came from Oakland, California-based Eqecat Inc. as Ike drove the Gulf of Mexico's waters into Galveston Island, blew out office windows and left at least 4.5 million people around Houston without power. AIR Worldwide, based in Boston, said Ike may have caused as much as $12 billion of insured losses on land, with a likely loss of $10 billion. Offshore losses may range from $600 million to $1.5 billion and probably totaled $1 billion, AIR said.

AIR and Eqecat agreed that $8 billion was the minimum toll, making Ike at least the fourth most-expensive storm in US history. Ike was the first hurricane to hit a major US metropolitan area since Katrina devastated New Orleans in 2005, costing insurers $41.1 billion.

Ike made landfall in Galveston with winds as high as 110 miles an hour (175 kilometers an hour). “The damage won't be confined to the coast,” Peter Dailey, director of atmospheric science at AIR, said in an interview. “Damage from hurricane-force winds will extend well inland, maybe as much as 200 miles.”

A third firm, Risk Management Solutions Inc of Newark, California, said total insured damage on land and offshore ranged from $6 billion to $16 billion.

Early damage reports indicated that several buildings lining Galveston's seawall were destroyed, and unchecked fires were burning in that city, AIR said. President George W Bush cleared the way for Texas to receive federal disaster aid.

Storm Surge: Ike had been downgraded to a tropical storm at 1 pm local time, as sustained winds decreased to about 60 mph, the National Hurricane Centre said.

The storm was strengthening until the moment it reached shore and rivaled Katrina in size, if not intensity, said Tom Larsen, a senior vice president at Eqecat.