The massive Category 4 storm roared ashore with 140 mph winds and a storm surge -- the wall of water pushed toward shore by the force of the swirling winds -- in excess of 20 feet in some areas. On top of the hurricane damage, levees erected to contain water in Louisiana's Lake Pontchartrain overflowed and broke, flooding New Orleans. Hundreds of people were killed in the ruined historic city and other places in Louisiana and Mississippi.
Besides the devastating human toll, the economic impacts are expected to reach new heights.
The cost of property and infrastructure damages and business interruptions could soar past $100 billion, according to Risk Management Solutions Inc., a California-based company that specializes in estimating potential losses from natural disasters and terrorist attacks. At least half of the economic loss is expected to come from the flooding of New Orleans, the company said.
The firm also estimated that insured losses from Hurricane Katrina could reach to between $20 and $35 billion.
"Dollar-wise, this is the largest economic loss from a hurricane," said Shannon Mckay of RMS. Hurricane Andrew, previously the most destructive U.S. hurricane on record, which slammed Florida in 1992, caused half of Katrina's estimated damage, she said. "This is more on the scale of a World Trade Center loss."
What separates Hurricane Katrina from those of the past is the scope -- affecting wide swaths of Louisiana, Mississippi, Alabama and Florida -- and variety of the damage, said Insurance Information Institute President Gordon Stewart. "Just in terms of people killed, there's never been anything like this ... a total loss of a major city."
Even the way insurers responded in the wake of Katrina was turned on its head. Instead of the conventional method of addressing the needs of the hardest-hit areas first, the total evacuation of New Orleans and lack of access to the most devastated parts of the Gulf Coast meant insurance companies are starting with the areas that can actually function and are not in as bad a shape, said Stewart.
The full cost to insurers and their customers may not be known for some time because of the lack of access to dwellings to assess their damage.
Insurance companies, including the top two in the Gulf Coast region -- Illinois-based State Farm and Allstate, are still tallying claims and do not know at this point what their total payout will be.
"The focus is very much on recovery" and reaching customers in impacted areas, said Bill Mellander, spokesman for Allstate Corp.'s national catastrophe team, who spent some time at his company's mobile response units.
"You have a mass of people whose entire reality has been dramatically altered," said Mellander. Despite that fact, people were "remarkably matter of fact," understanding and appreciative that the units were there, he said. Some customers had all their documents in waterproof containers and some had nothing. As long as they had proof of identification, their claims could begin to be processed, he added.
State Farm Insurance Co. has received 223,000 property claims so far, and more are expected, said the company's spokesman Dick Luedke.
According to the Insurance Information Institute, the anticipated number of claims from Katrina will surpass the record-breaking 2 million claims that resulted from the series of hurricanes that hit Florida in 2004.
Another unusual element is that most of the damage caused by Katrina was from flooding, as opposed to wind damage as in Florida last year, according to the institute.
No private insurance companies offer flood insurance. Instead, the Federal Emergency Management Agency, a unit of the Department of Homeland Security, has a National Flood Insurance Program.
Robert Hartwig, chief economist at the Insurance Information Institute, said Hurricane Katrina could force the largest payout of federal flood insurance in history -- in the ballpark of $3 billion, according to a CNN/Money report.
But some consumer groups argue insurance companies should not deny policyholders money on the basis that they don't handle flood insurance.
"The fact that survivors may have to go to court to fight for their rights at a time like this is shameful," Douglas Heller, executive director of the California-based nonprofit Foundation for Taxpayer and Consumer Rights, said.
Flood insurance is relatively inexpensive -- the average premium is about $400 -- but voluntary, so people don't often purchase it even though it's the largest single cause of damage to homes, said Stewart of the Insurance Information Institute. Insurance agents receive little commission for it and homeowners who live outside flood-prone areas feel little motivation to purchase it. However, Stewart said he hopes one good thing that will come of Hurricane Katrina will be a new motivation for people to buy flood insurance.
And the impact of Katrina threatens to weigh heavily on those residents not directly affected by the storm and flooding. Although state regulations will ensure private insurance rates in states not affected by hurricanes will remain relatively unchanged, residents of Louisiana, Mississippi and other states impacted by Katrina will likely see increased costs, though not radically, said Luedke.
The pricing model that insurance companies use is affected by not just individual events, such as hurricanes, tornadoes and hail storms, but the area's history, which prevents major fluctuations in rates, he said.
Regarding whether insurance providers would be more reluctant to provide coverage in proven hurricane zones, Mellander said he doesn't believe so.
"You have to take a look at the risk associated with doing business in any area," he said. "That kind of evaluative discussion is happening constantly, and that's not going to change because of this (storm)."
But much of the insurance industry's work will kick in as residents rebuild. As far as victims of Katrina's immediate needs, the Federal Emergency Management Agency is providing $2,000 per household to families displaced by Hurricane Katrina to buy emergency supplies and pay transportation costs. The emergency agency expects 320,000 households to claim the money, at a cost of $640 million, reported the Associated Press.
To date, the federal government has allocated an unprecedented $63 billion to the Katrina relief effort, and private donations total hundreds of millions of dollars. President Bush has indicated there will likely be additional federal aid coming.
Meanwhile, the decision of whether the thousands of displaced residents from Hurricane Katrina will return at some point to the flood-ravaged areas remains to be seen.