Risk Management Solutions recently announced that insured losses from Hurricane Katrina are estimated to be $40-$60 billion, of which $15-$25 billion are related to the Great New Orleans Flood. Total economic losses are now expected to exceed $125 billion. On September 2, RMS released a preliminary insured loss estimate of $20-$35 billion (excluding flood losses in New Orleans). At that time, total economic losses were estimated at over $100 billion. Today's revised estimates reflect an extensive analysis that RMS has performed to model and estimate the insured and uninsured loss components of the flood.

Standard commercial and residential policies issued by private insurers cover wind damage, but flood is excluded. Businesses and homeowners can obtain coverage with fixed limits through the National Flood Insurance Program (NFIP). Private sector insurers also offer coverage in excess of the limits provided by the NFIP, which is commonly purchased for high-value commercial properties or homes.

Katrina's eye passed to the east of New Orleans on the morning of August 29, and there was little time to assess wind damage before the levees broke and flooding began. Distinguishing the portion of damage attributable to wind or flood will be difficult in many areas that were impacted by winds in excess of 100mph. The final insured loss from Hurricane Katrina will depend on how flood claims are apportioned among the NFIP, private insurers, and individuals. Insurers can also expect deterioration losses in houses that are abandoned for a long period of time, and losses from fires and looting in the flooded city.