Reporters Weigh Financial Impact of Hurricane Charley

As the billion-dollar cost estimates of Hurricane Charley settle, Robert Hartwig, chief economist for the Insurance Information Institute, offers advice for journalists.

"There is a human element to it. But from an insurance perspective, there are a couple of angles, beat by beat. Business reporters will focus on the financial impact. The other one is more local. What impact will this have on rates in the area?" says Hartwig.

The majority of reporters calling the Insurance Information Institute in recent days wanted to know specifically how much Charley is going to cost. However, it takes 10 to 14 days to arrive at the final estimate.

"All of these claims will be written off in the 3rd quarter whether we pay for these claims for a year or longer," Hartwig says.

When focusing on the financial impact that such a natural disaster could have, Hartwig offers some key questions to ask:

• What happened to insurers' stock prices?
• Does this mean that insurance rates and premiums will go up?
• Will the insurers be downgraded? After 9/11, many insurers were downgraded. It didn't happen with Hurricane Charley, but it did occur after Hurricane Andrew.
• Are the market shares for the insurance companies concentrated or spread out (meaning more or less risk)?

State Farm, the largest insurer in Florida, did increase rates after Hurricane Andrew swept through Florida in 1992.

Hartwig recommends calling up analysts, ratings agencies and economists for input.

There is also a longer-term story following the residents as they rebuild their homes and find new jobs.

"There will be a notable stimulus to the most devastated areas with the rebuilding that will come," Hartwig says.