(by Dr. Goldfinger)

The sum to cover losses from Hurricane Charley will probably reach $7.4 billion. Insurers say after Andrew in 1992 this is the second most expensive hurricane in the U.S. history.

In 1992 losses caused by Andrew exceeded $15.5 billion, which is twice more than Charley’s.

Officials expect to force CAT Fund (Florida’s hurricane catastrophe fund) to provide at least $1 billion to help insurers cover losses since it is the first big payout from it in 12 years. Actually, the fund has been used only twice before in 1995 for two payouts with the amount less than $14-million.

Prior insurance losses were estimated at a higher price of about $11 billion. Other economic losses also include lost wages and revenues, tax receipts, storm surge and flooding losses, and additional government outlays for disaster relief and damage to property that was uninsured.

The reasons for insurance companies’ losses are not so huge are that homeowners usually pay a hurricane deductible of 2 percent or higher for homes worth over $100.000. That will add up to more than $100 million in repairs that will be paid by homeowners, not insurers. Moreover, Charley mostly hit rural areas, while hard-to-hit areas usually have lower property values.