Petroleum-Refining Industry Business Interruption Losses due to Hurricane Katrina

Hurricane Katrina had a significant destructive effect on the Gulf Coast's petroleum-refining industry. In many cases, refineries sustained considerable damage and had to suspend operations for extended periods of time. Multiple Gulf Coast refineries filed substantial business interruption loss insurance claims following Hurricane Katrina's disruption of their production. This paper presents a methodology to calculate refinery business interruption losses taking into account the effect of Hurricane Katrina on input and output market prices during the period of restoration. Our results indicate that adjusting for Hurricane Katrina's effects on crude oil and petroleum product market prices significantly changes the magnitude of refinery business interruption loss claims.