Hurricane Charley will probably cost insurers $7.4 billion, making it the second-costliest storm in U.S. history, according to the first loss estimate based on insurance claims.
The Insurance Information Institute, a New York-based industry group, made the estimate Wednesday after canvassing the biggest insurers in Florida, said Robert Hartwig, the institute's chief economist.
"It's a preliminary estimate based on what's going on, on the ground," Hartwig said. "While formidable, Charley falls generally within the range of catastrophic risk that insurers anticipated and built into insurance premiums."
Total losses from the hurricane, including uninsured damages, deductibles and lost business activity, may exceed $14.5 billion, the Federal Emergency Management Agency reported this weekend.
The Standard & Poor's 500 Property & Casualty Insurance index rose 0.9% on Wednesday and has gained 2.5% this week. The storm's damage may slow a trend of rate reductions on property coverage, said Century Capital Management's Kevin Callahan.
Charley slammed Florida's west coast Friday with sustained winds of 140 mph, wrecking homes, toppling trees, cutting power and causing at least 20 deaths. It was the most intense and costliest storm since Hurricane Andrew in 1992, which resulted in $15.5 billion of claims, or $20.3 billion in today's dollars, the institute said.
Allstate Corp., Hartford Financial Services Group Inc. and other Florida insurers have limited their liabilities from hurricanes by participating in a state catastrophe fund, charging separate deductibles for wind damage, and letting a state-chartered insurance company pick up the worst risks.
The state insurer, Citizens Property Insurance Corp., is Florida's biggest provider of hurricane insurance, the institute said. Many of Citizens' policies are just for wind damage.
Allstate, the second-biggest U.S. home insurer, may report $360 million of losses from Charley, or 33 cents a share, according to Lehman Bros. Holdings Inc. analyst Chris Winans. Shares of Allstate rose 75 cents to $46.87 on the New York Stock Exchange, and have climbed 2% this week.