The most immediate financial impact yesterday was to send the price of oil soaring over $70 for the first time in history.
Eqecat, the US catastrophe modelling company, said damages from the hurricane could be anywhere between $12bn and $25bn, depending on how long the storm continues over the US mainland. This means it could far outstrip the cost of Hurricane Andrew, which caused about $20.5bn of damage when it hit the Bahamas and the east coast of America in 1992.
Insurance stocks tumbled yesterday, with Hanover Re - one of the hardest hit by last year's storms - leading the fallers in Europe, with a drop of almost 3 per cent. In the US, AIG, the world's largest insurer, and St Paul Travelers, the US's second largest commercial insurer, fell more than 1.5 per cent as soon as markets opened in New York.
UK insurance stocks, which did not trade yesterday because of the bank holiday, are expected to follow suit this morning. The fact that much of New Orleans lies below sea level makes it particularly vulnerable and water damage is likely to turn out to be the main expense, Eqecat said.
But its estimates do not include damage to oil rigs. The firm said its very broad estimate of the damage was because hurricanes often change direction and intensity suddenly. The onset of the storm sent oil prices soaring past $70 a barrel yesterday, after oil companies were forced to evacuate rigs in the Gulf of Mexico, where almost a third of US oil is produced.
Analysts said the price would top $75 if the storm was more costly than Hurricane Andrew.Reuse content