A “relatively quiet” 2012 has left property and casualty insurers well-positioned to take on losses from the major storm that has hit the eastern United States, rating agency A.M. Best Company has said.
“Superstorm” Sandy, which began as a hurricane and has transitioned into a post-tropical storm, is the first large-scale catastrophe event of the year, A.M. Best said in a special report.
The storm comes in contrast to a devastating 2011, where multiple catastrophes led to it being the second-worst year on record for insured losses, the company pointed out.
The overall industry underwriting loss for the first half of this year was $4.7 billion, compared with $22.2 billion in the first six months of 2011, the report noted. As of Oct. 29 this year, U.S. catastrophe losses were down 51% from 2011, A.M. Best noted.
The biggest impact on primary insurers from Sandy will likely be wind and downed tree damage to roofs and cars, according to A.M. Best. Business interruption losses from power outages will also be a major impact, especially as the storm has hit during the work week, the report said.
“National, well-diversified carriers,” such as State Farm and Allstate Insurance, have the greatest exposure in the Northeast, the report said, although a few regional insurers may see a major impact from the storm as well.
Most of the storm’s financial impact will be absorbed by the National Flood Insurance Program (NFIP) in the U.S., A.M Best said. That program covers homes for up to $250,000 for the structure and $100,000 for personal possessions, and commercial properties up to $500,000 for the structure and $500,000 for contents, the report noted. The NFIP was accountable for 79% of losses from Hurricane Irene in 2011, A.M. Best noted.
Image: An infrared image of Hurricane Sandy on Oct. 29 at 2:17 p.m. ET. (Credit: NASA/JPL-Caltech)