Hurricane Harvey, which has pummeled the coastal region of Texas with flooding and heavy winds, is expected to cause havoc in the insurance industry as well. According to various reports, the hurricane is expected to cost insurance companies a substantial amount – ranging from the low-single-digit billions up to $30 billion.

Mark Hanna, spokesman for the Insurance Council of Texas, estimated that losses related to the hurricane could be a "massive dollar amount" comparable to that of Hurricane Ike, a 2008 Category 2 storm that hit the same Texas region. Investment bank JPMorgan had more specific figures and estimated that Hurricane Harvey could result in insured losses of between $10 billion and $20 billion. That figure amounts to "slightly less" than one-quarter of the insurance industry's total earnings, which would make Harvey one of the 10 costliest hurricanes ever to hit the U.S. (See also: Intro to Insurance: Property and Casualty Insurance.)

According to Sarah DeWitt, the JPMorgan analyst who wrote the report, insurance losses directly attributed to Harvey could turn out to be in the low-single-digit billions. The disconnect between this figure and DeWitt's overall estimate is due to rules in the insurance industry. As she explained in her note, flooding is not covered under homeowner's insurance because it is sold by the National Flood Insurance Program, a government agency. (See also: Hurricane Insurance Deductible Fact Sheet.)

That said, the hurricane could result in "meaningful losses" for commercial insurers because flooding is covered under their terms. "Harvey appears to be more of a flood event, and we think the loss estimates are misunderstood," wrote DeWitt. Catastrophe modeling firm AIR Worldwide has modeled losses of between $1.2 billion to $2.3 billion for windstorm damages from Harvey's path. Enki Holdings, a data analytics firm, has a figure of $30 billion for estimated losses from the storm.

The overall impact of these losses will be reflected in claims filed with insurance agencies. In her note, DeWitt listed The Allstate Corporation (ALL), State Farm and Farmers Insurance Group as companies that might be affected by Hurricane Harvey. Even so, Allstate's shares edged slightly upwards by 1% to $90.82 today, and the company's stock has risen by 22% so far this year. (See also: Allstate Beats Earnings on Higher Revenues in Q2.)

For context, Hurricane Ike had a tally of $12 billion in insurance claims. A total of 800,000 windstorm claims and 44,000 flood claims were filed. In monetary terms, those figures translated to $9.8 billion in windstorm-related claims and $2.175 billion in claims from the National Flood Insurance Program.

After Hurricane Katrina, Allstate's shares rose by 10%. However, stocks fell for reinsurers such as Warren Buffett's Berkshire Hathaway, Inc. (BRK.A) and American Insurance Group. This is because insurance companies pass on their losses to reinsurance companies, which are forced to absorb those losses. Swiss Re Ltd (SSREF), the world's second biggest reinsurer, estimated losses of approximately $1.2 billion due to Katrina. Following that hurricane, Berkshire Hathaway also reported its lowest quarterly profit in four years. However, it was able to recoup losses by charging higher insurance rates a couple of years later. (See also: How to Financially Prepare for a Hurricane.)

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