The two leading catastrophe modeling firms, RMS and AIR, have published very different cost estimates for the insured losses associated with Hurricane Gustav, with the RMS estimates at twice that of AIR.

From AIR:

Catastrophe risk modeling firm AIR Worldwide Corporation estimates that insured losses to onshore properties in the U.S. are between $2 billion and $4.5 billion, with an expected loss of $3 billion.

From RMS:

Insured losses from Hurricane Gustav could range between $4 billion and $10 billion, according to initial estimates based on the latest information from catastrophe risk experts, Risk Management Solutions (RMS). . . Insured losses for onshore damage to residential and commercial properties, as well as business interruption, are estimated to be between $3 billion and $7 billion.

Neither estimate includes losses associated with flooding due to levee damage or rainfall, which are typically not insured (by the private sector).

The fact that the two leading catastrophe modeling firms could differ by [UPDATE: as much as] 100% in their estimates, where each has access to the exact same storm data and exposure information, should serve as a reminder of the fundamental imprecision of this art. I’ll make a note to see where the final insured claims come in at, and see whose estimate fared better. The historical analogues from our normalization dataset would suggest AIR, but we shall see.