Hurricane Ike (Offshore)

Post Landfall 1 | Summary
Posting Date: October 1, 2008, 4:00:00 PM

AIR has revised its estimates of ground-up losses to offshore platforms and rigs in the Gulf of Mexico from Hurricane Ike to between $3.5 billion and $3.8 billion. These losses reflect wind and wave damage to platforms and rigs and direct and indirect loss of revenue because of reductions in oil and gas production. Note that lower and higher losses are also possible because of several sources of uncertainty. These sources include hazard (uncertainty in the values of storm parameters and in the wind speed and wave height at different locations), vulnerability (uncertainty in deck heights for some platforms), and exposure (some rigs may only recently have moved to locations other than those in our database). Note that “ground-up” loss refers to losses prior to the consideration of any insurance terms and conditions. Estimating industry insured losses is difficult because of the assortment of terms and conditions used in the market. However, based on historical loss experience and average policy conditions, AIR estimates industry insured losses to offshore assets are between $900 million and $1.8 billion for Ike. Post-storm analysis of Hurricane Ike was performed using data from the NOAA Doppler weather radar to more accurately define the storm’s characteristics in the period prior to landfall. GIS analyses of these data allowed for estimation of hourly ranges of eye diameter and Rmax values, providing AIR scientists with the information needed to more accurately determine the wind fields associated with this storm. (Note that Rmax is not provided in National Hurricane Center advisories at the time of the event.) During the 12-hour period of time prior to landfall, Hurricane Ike in fact displayed different characteristics from those observed at the time of landfall. While still out in the open Gulf of Mexico, Ike had a very broad circulation and did not exhibit a well-defined eyewall. The National Hurricane Center also reported a pronounced disparity between central pressure and wind data, with central pressure being consistent with a much more intense storm than dropsonde and flight-level wind data was suggesting. As the storm neared the coastline, the circulation tightened up, Rmax decreased somewhat, and the eye became more organized, indicating that Ike was intensifying. Despite the decreased Rmax, however, hurricane force winds extended an impressive 120 miles from the center. The losses reported above include an allowance for losses sustained by platforms in the state waters of Texas and some platforms in the bays along the Louisiana coastline, neither of which are included at present in the industry exposure database in the AIR U.S. Hurricane Model for Offshore Assets. The number and value of these shallow-water assets is relatively small, but they will make a difference to industry loss estimates, particularly when some of these platforms are toppled and operators’ extra expenses and removal of debris coverages are triggered. However, it should be emphasized that AIR’s industry exposure will not affect CLASIC/2 users entering their own exposure information, nor prevent those users from obtaining reliable loss estimates from that information. Finally, because many platforms and rigs impacted by Hurricane Ike also were affected by Hurricane Gustav less than two weeks earlier, a potential for loss double counting exists. In point of fact, the damage tally from Gustav was not complete at the time Ike entered the Gulf of Mexico, and it will be difficult if not impossible in many cases to differentiate what damage was caused by which storm. AIR expects that many of the losses that were caused by Hurricane Gustav in areas also impacted by Hurricane Ike will be attributed to Hurricane Ike.

Post Landfall 1 | Downloads
Posting Date: October 1, 2008, 4:00:00 PM