One Forecast pegs Hurricane Gustav Insured Damage between $4 billion to $10 billion

I wish all the best to those adversely impacted by hurricane Gustave. Here's hoping that everyone made it out alive with little damage.

MarketWatch quotes a Risk Management Solutions estimate for the Gustav damage to insurers between $4 billion and $10 billion.

Hurricane Gustav caused $4 billion to $10 billion of insured losses, according to initial estimates, Risk Management Solutions said. RMS, the Newark, Calif., consultant on managing catastrophic risks, estimates insured losses from damage to offshore oil platforms and wells, plus production interruptions caused by wind and waves, at $1 billion to $3 billion. It pegs insured losses for onshore damage to homes and businesses, plus the damage from interrupted business, at $3 billion and $7 billion.

Mega-castastrophe reinsurers often take the brunt of the losses so it remains to be if there is any damage to Montpelier Re (MRH). Montpelier Re nearly went bankrupt after hurricanes Katrina and Wilma and management has claimed that they have changed their models so let's see how the new models perform. Since this hurricane didn't do much damage, I doubt it has much impact on Montpelier Re.

The risk with investing in any insurance company is that you are totally reliant on the risk underwriting skills of the company. This is something that is hard to evaluate for outsiders so one is basically investing with the assumption that they are not going to misprice risk.