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Learning English - Words in the News
02 September, 2005 - Published 11:47 GMT
Calculating the cost of Hurricane Katrina
New Orleans Superdome

Hurricane Katrina is sure to have a big economic impact. Often with natural disasters, it is the insurance industry that is among the first to produce estimates of the economic damage. How do they estimate the cost of the damage? This report from Andrew Walker:

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The insurance industry is well prepared to make a quick rough and ready estimate of the loss it will suffer. The early figures are based on computer programmes operated by companies called risk modelling agencies. Over the last few days they have been using fairly detailed information in their databases about the area affected.

They have knowledge about the population, housing density, types of construction and the extent of insurance cover. To that they add information about wind speeds, rainfall and the path the storm has taken. They also have to make some estimates about what are called excesses - the amount that policyholders have to cover themselves, before they can claim from their insurers. For big companies, these figures can be millions of dollars.

The insurance cover is predominantly held by householders and private business. There will clearly be extensive damage to government property but industry experts say it is not widely insured. They also say that the cost of damage to offshore oil installations is likely to be very high, perhaps the largest ever suffered by the industry. It is also especially difficult to estimate at this early stage. One expert said that these early figures are not hugely accurate. He also said there are often additional factors that can push up losses - for example, labour and building materials costs often rise because they are in such demand for reconstruction.

In addition there are uninsured losses - which could according to one insurance industry economist put total damage as high as fifty billion dollars.

Andrew Walker, BBC Economics Correspondent

Listen to the words

rough and ready estimate
an estimate that is not precise or accurate

housing density
the number of houses in a particular area

the extent of insurance cover
how much insurance people have

people who have insurance policies

mainly, mostly


offshore oil installations
oil production facilities not on land but in the sea

not hugely accurate
not very accurate

push up
increase, make bigger

uninsured losses
losses for items that are not inusured and therefore will not be part of what the insurance companies have to pay

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