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Hurricane Rita Costing Insurers Billions

According to a study, leading insurers may face record damage claims from Hurricane Rita. Eqecat Inc., a company which provides storm-damage models, says that according to predictions with Rita coming ashore near Port Arthur, Texas, as a Category 2 or 3 Hurricane, the damage could be between $9 billion and $18 billion. Rita did come ashore near Port Arthur, just east of the Texas border, as a Category 3 storm, according to the National Hurricane Center.

Paul Newsome, an analyst at A.G. Edwards &, Sons, believes, "A $10 billion storm is large enough to trigger price increases but not so large that companies won`t survive to benefit." Currently, Newsome rates shares of insurer Allstate at "hold", and "buy"` on St. Paul Travelers.

According to Bloomberg, U.S. insurers are facing their most expensive hurricane season ever, with estimated costs from Katrina and Rita threatening to deplete as much as a fifth of the $402 billion in surplus, or cushion what they have for unexpectedly high claims. Insurers may choose to raise prices, a move to appease investors who look past the devastation to the "bottom line."