When Hurricane Andrew struck south Florida in 1992, it caused what was then the largest natural disaster in American history, with more than $30 billion worth of damage. In the storm's aftermath, the state's property-and-casualty insurance industry fell into a tailspin. Several small insurers collapsed. Big companies began dropping Florida policies by the thousands. State regulators declared a moratorium on cancellations and created a state pool to cover uninsured homeowners. But try as they might, the regulators could only slow, not stop, the cancellations, and the largely unfunded state pool swelled to hundreds of thousands of policies over the next several years. A decade later, the storm's effects continued to ripple through the state's insurance sector.
The economic damage from Hurricane Katrina looks to be larger, and many commentators already are calling it the costliest natural disaster ever to strike the United States. Indeed, some estimates put the damages/losses as high as $200 billion. Meanwhile, the oil-and-gas industry has reported serious setbacks, with oil-drilling platforms toppled and refineries knocked out of commission. The insurance industry will suffer, too, in the next few months as businesses and homeowners file claims for their losses. And regionally, of course, the damage is cataclysmic. Much of New Orleans remains flooded, and an industry on which the city and its people depend - tourism -- has no clear path for returning to viability. The French Quarter may have been spared, but many of the owners and employees of its restaurants, bars and hotels are holed up, for the foreseeable future, in faraway places like Houston and Dallas.
Katrina's economic impact is therefore likely to be lasting and large, says Wharton finance professor Jeremy Siegel. "Everyone in that area of the country -- all their purchases are going to be curtailed until they know where they are going to live," he says.
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