Hurricane Ike continued to rattle insurers' nerves yesterday as the storm strengthened and laid path for coastal Texas. With some forecasts saying Ike could be a category four storm when it makes US landfall, if it hits near Galveston and enters the Houston Ship Channel losses "would rival Hurricanes Andrew or Katrina," said an Insurance Council of Texas spokesperson.

Ike strengthened to sustained 100 mph winds yesterday after leaving hurricane-battered Cuba. While a category two hurricane at that wind speed, the National Hurricane Center in Miami said yesterday afternoon, "Ike is expected to become a major hurricane within the next 24 hours". The NHC rates hurricanes as "major" once they reach 111 mph.

Catastrophe risk modelling companies also expect the storm will build in intensity but where it will make landfall remains open to guesswork and could result in wildly varying insured losses.

Dr. Peter Dailey, director of atmospheric science at AIR Worldwide, said yesterday: "Gradual reintensification is expected as the centre moves over warm eddies of the Loop Current, the degree of strengthening remains highly uncertain. A high pressure ridge over the northern Gulf should keep Ike on a generally west-northwest track toward the central coast of Texas, where it is forecast to arrive sometime on Saturday."

According to a recent AIR report, the insured value of residential and commercial properties in coastal counties of Texas exceeds $890 billion. But Dr. Dailey said the distribution is far from uniform with a high concentration of exposure in Houston's Harris County.

Texas began preparing large swathes of coastline for evacuation yesterday — 250 miles stretching from Matagorda Bay to Corpus Christi and south to Brownsville. US president George Bush declared a state of emergency for the state.

Texas Governor Rick Perry declared a disaster threat for 88 of the state's 254 counties, placed up to 7,500 state guardsmen on standby for rapid deployment and readied 1,350 buses for evacuation areas among other preparations.

For insurers, a hit near the Galveston area and the Houston Ship Channel is a worst-case scenario as the area is heavily insured, exposed and has high liability.

The Texas Windstorm Insurance Association (TWIA) — an insurer of last resort in Texas — has $18 billion in insurance exposure alone and carries $1.5 billion reinsurance.

TWIA's executive director Jim Oliver told the Beaumont Express newspaper the association has 500 claims adjusters ready to hit the Texas coast. "But nobody will be ready if a category three or worse hits Galveston," he told that paper.

Galveston was last hit by a major hurricane in 1900 — a category four storm that claimed 8,000 lives and hit on September 8. In today's terms that storm would result in $33 billion in insured losses, according to an AIR study published in the Journal of Reinsurance in 2006.

But catastrophe modeller Risk Management Solutions (RMS) said yesterday it is still too early to predict a landfall point, with the most recent forecasts suggesting the storm will make landfall at Corpus Christi. "Since all of the Texas coast as well as northern Mexico and southwest Louisiana are still within the uncertainty cone, it is far too early to predict an exact landfall location," RMS director of model management Dr. Christine Ziehman said.

Despite this the company noted: "Offshore oil and gas operators in the Gulf of Mexico who has started restoring production and re-boarding platforms and rigs following Hurricane Gustav are now beginning to take precautions for Hurricane Ike."

With Ike roaring toward the Gulf of Mexico, home of one quarter of the US crude oil production, major companies like Shell and BP Plc announced they were completely shutting down production of oil and gas in preparation and smaller companies were following their lead.

Ike has already pummelled Cuba, Haiti and Turks and Caicos. The Caribbean Catastrophe Risk Insurance Facility announced yesterday it would give $6.3 million to the government of Turks and Caicos under the terms of the islands' disaster policy bought at the start of the 2008 Atlantic storm season.

Haiti, however, where storms over the past month are estimated to have killed 331 people, will not receive coverage as it was hit only by Ike's outer bands.