new york (Bloomberg) — Insured losses from Hurricane Gustav, which lashed the Louisiana coast yesterday, may not be as high as the first damage estimates indicated, according to firms that specialise in predicting catastrophes.

The hurricane lost power as it headed for shore yesterday, and spared New Orleans a direct hit. Damage predictions issued by competing catastrophe-modelling firms for onshore losses shrank from as much as $10 billion at noon local time yesterday to no more than $4.5 billion at 10.30 p.m. All the estimates were less than Katrina's record $41.1 billion in 2005.

"Things didn't play out as some of the earlier forecasts had looked," said Tom Larson, a senior vice president with Eqecat Inc., on Bloomberg Television. The modelling firm now predicts claims between $3 billion and $7 billion, down from a range of $6 billion to $10 billion yesterday.

Gustav is the first test since 2005 of the industry's efforts to reduce losses in catastrophe-prone regions. Allstate Corp. and State Farm Mutual Automobile Insurance Co., the two largest US residential insurers, turned away homeowners in states along the Gulf of Mexico and East Coast after hurricanes including Katrina, Rita and Wilma caused $61.9 billion in claims.

Risk Management Solutions Inc. said yesterday the storm would cause $3 billion to $7 billion in losses on land. Claire Souch, director of model management for the Newark, California-based firm, said in an interview yesterday the damage would be "at the lower end of that range".

"There's been coastal flooding, but not wholesale destruction of physical property or buildings," Souch said. "The high end of our estimates are a worst-case scenario, and that didn't happen yesterday."

AIR Worldwide Corp., a Boston-based risk modeller, said damage on land will be between $2 billion and $4.5 billion. Even at the low end of the AIR estimate, Gustav would rank among the 12 costliest US hurricanes for damage on land.

Gustav weakened to a category two storm by the time it reached land at about 10 a.m. local time on Monday southwest of New Orleans, which was evacuated in advance of its arrival. Gustav's winds were close to 110 miles per hour as it came ashore. It was downgraded to a tropical depression yesterday, with maximum sustained winds of 25 miles an hour, according to the National Hurricane Centre.

All estimates fall short of the claims paid by insurers as a result of Katrina, whose record damage more than doubled the cost of the next most costly storm in US history. Katrina prompted insurers to re-examine the risks in catastrophe-prone regions and raise prices for coverage of homes, businesses and offshore oil platforms in hurricane zones.

"Gustav will not have the impact" that Katrina did on prices, said Elizabeth Malone, an analyst with KeyBanc Capital Markets, in an interview on Bloomberg Television. "There's excess capacity in the property-casualty industry for as much as $100 billion on a worldwide basis."

Allstate, based in Northbrook, Illinois, fell 11 cents to $45.02 at 1.48 p.m. in New York Stock Exchange composite trading. State Farm, based in Bloomington, Illinois, is owned by its policyholders and has no publicly traded debt.

Standard & Poor's, which grades the creditworthiness of insurers, said today that "few, if any, rating changes will result" from the losses related to the storm.

Katrina's losses have in turn been outpaced by more than $77.6 billion in insurer write-downs tied to the decline of US mortgage markets through the end of the first quarter.

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. AIR said offshore claims may run from $1.8 billion to $4.4 billion.

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

Hurricane Dolly, the first Gulf of Mexico hurricane of the season, cost insurers about $285 million when it struck southern Texas in July, according to a tally by Insurance Services Office Inc.

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.

Forecasters will next turn their attention to Tropical Storm Hanna, which was near the Bahamas yesterday. Hanna may strengthen to a hurricane and pass near the Florida coast before making landfall in South Carolina on September 5, the hurricane centre said. Two more tropical storms, Ike and Josephine, are heading west across the Atlantic with winds of at least 40 miles an hour.