Sept. 1 (Bloomberg) -- Hurricane Gustav may trigger insurance claims as high as $10 billion, according to firms that specialize in catastrophes, making it potentially the fourth- highest total among storms that hit the U.S.

The hurricane weakened as it headed for shore, keeping insured losses on land to between $3 billion to $7 billion and oil-drilling damage at about $1 billion to $3 billion, according to estimates from Newark, California-based Risk Management Solutions Inc. That's ``significantly smaller'' than Katrina's record $41.1 billion in 2005, Robert Muir-Wood, head of research for RMS, said in an interview on Bloomberg Television.

Gustav is the first test since 2005 of the insurance industry's efforts to reduce losses in catastrophe-prone regions. Allstate Corp. and State Farm Mutual Automobile Insurance Co., the two largest U.S. home insurers, were among companies that stopped taking on new policyholders in several states along the Gulf and East coasts in the months following the damage caused by Hurricanes Katrina, Rita and Wilma.

``They've skirted a big one,'' Muir-Wood said. ``There will be fairly significant losses, I would say, but actually it's not going to be nearly the level of destruction we saw in 2005.''

Gustav weakened to a Category 2 storm by the time it reached land at about 10 a.m. local time in Louisiana southwest of New Orleans, which was evacuated in advance of the storm. Gustav's winds were close to 110 miles (177 kilometers) an hour as it came ashore and slowed to about 80 miles an hour as of 4 p.m.

Expensive Storms

Tom Larson, a senior vice president with Eqecat Inc., a risk modeling-firm in Oakland, California, said insured losses may be $6 billion to $10 billion, primarily in New Orleans and the surrounding area. Larson's data didn't include offshore damage.

Even at the low end of the RMS estimate, Gustav would rank among the 10 most-costly U.S. hurricanes. If the storm reaches the top of the Eqecat estimates, it will surpass all U.S. hurricanes for damage on land except for Katrina, Wilma and Andrew. The latter cost $15.5 billion when it struck Florida and Louisiana in 1992, according to Insurance Services Office Inc. in Jersey City, New Jersey.

Gustav may have caused $1 billion to $2 billion in insured damage offshore, said Steve Smith, an atmospheric physicist with Carvill Group, a reinsurance brokerage.

``The area it hit has a good population of rigs,'' Smith said. ``It wasn't too bad for the Gulf oil field.''

Hurricane Dolly, the first Gulf of Mexico hurricane of the season, cost insurers less than $750 million when it struck southern Texas in July, RMS estimated.

Oil Drilling

Insurers of oil platforms in the Gulf of Mexico have joined companies selling property coverage on land in attempts to limit losses. American International Group Inc., Zurich Financial Services Group AG and Liberty Mutual Group Inc. were among insurers that raised prices fivefold and capped how much they'll insure after Katrina and Rita caused record offshore claims estimated at $8 billion in 2005.

``We tend to remember and fight the last war,'' said Steve Maloney, a risk management consultant for Stamford, Connecticut- based Towers Perrin. ``People went into this one rightfully worried that this might become another Katrina. Thankfully, there will be far less disruption than the last time.''

Katrina became the most expensive disaster in U.S. history when it came ashore three years ago. Until now, no major storms had made landfall in the U.S. since Wilma capped the storm season later that year by causing $10.3 billion in insured losses.

Typical Damage

Data on insured losses may understate actual costs because the figures don't include damage to uninsured property or destruction caused by actions excluded from some policies, such as flooding.

Category 2 winds like those of Gustav can damage roofs, doors and windows, according to the National Hurricane Center. Mobile homes, poorly constructed signs and piers may be vulnerable, and small boats in unprotected anchorages can break their moorings, the center said. There may also be ``considerable damage to shrubbery and trees with some trees blown down,'' according to the agency.

Forecasters will next turn their attention to Hurricane Hanna, which strengthened into the season's fourth hurricane in the Atlantic, the hurricane center said. Hanna became a Category 1 storm with winds at 75 mph, and was moving west-southwest at 5 mph near the southeastern Bahamas as of 1 p.m. in Miami.

The agency was estimating the storm may make landfall on the Georgia-South Carolina border on Sept. 5.

``When we get to Friday, you're going to see a monster of a hurricane,'' said Joe Bastardi, a meteorologist with private forecaster AccuWeather.com, on Bloomberg Television.

A third system, Ike, reached tropical storm status with winds of 50 miles an hour in the Atlantic today.

To contact the reporter on this story: Erik Holm in New York at eholm2@bloomberg.net.

Last Updated: September 1, 2008 17:56 EDT