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Strong Hurricane In Gulf Of Mexico Could Generate $65 Billion Offshore Energy Loss
A strong hurricane like Camille, a category 5 storm, with a track through the heart of Gulf of Mexico U.S. offshore energy platforms, is a substantial risk to the energy industry and broader economy that has the potential to cause damages of more than $65 billion, according to a new report.
“Property damage alone could exceed $35 billion and losses due to business interruption and reduction in production capacity could add another $30 billion to the loss,” says Richard Clinton, president of EQECAT, a subsidiary of ABSG Consulting Inc. “Industry insured losses are more difficult to estimate due to the changes in allocated insurance capacity, policy terms and limits following the large losses from 2004-2005 hurricanes, but could certainly be in the $15 billion range,” says Clinton.
“Both the energy industry and the U.S. economy face substantial risks due to Gulf of Mexico hurricanes. The EQECAT Offshore Energy catastrophe model can help exposed parties to better understand and manage that risk,” says Clinton.
The estimates were generated by EQECAT’s new offshore energy model, which was designed specifically for quantifying offshore energy risk. The damage functions were validated using extensive damage and claims data from hurricanes Ivan, Katrina and Rita, according to Mahmoud Khater, EQECAT’s chief technical officer.