$72 billion in total economic loss from Hurricane Sandy: Aon Benfield

Total overall economic losses caused by Hurricane Sandy are now estimated to be $72 billion, according to Aon Benfield’s Hurricane Sandy: Event Recap Report.

Insured losses are estimated to be $30 billion, including the roughly $7.2 billion in payments made by the National Flood Insurance Program (NFIP) in the United States, according to Aon Benfield’s cat modeling arm Impact Forecasting, the authors of the report.

“Sandy becomes the second-costliest hurricane ever recorded in the Atlantic Basin, second only to 2005’s Hurricane Katrina,” the report concludes.

Hurricane Sandy struck in late October 2012, making two landfalls in the Caribbean — as a category 1 hurricane in Jamaica and a category 3 hurricane in Cuba — before tracking through the Bahamas.

The storm underwent a complete transformation while exiting the Bahamas, which saw its wind field expand to more than 1,610 km in diameter. This gave it the title of having the largest tropical cyclone wind field since the records began in 1988.

Before making landfall in the U.S., Sandy started to lose tropical characteristics and was declassified by the National Hurricane Center (NHC) to a post-tropical cyclone. The system came ashore near Brigantine, N.J. with 130kph-sustained winds, accompanied by record storm tide heights.

In the U.S., Sandy damaged or destroyed at least 650,000 housing units and 250,000 insured vehicles, with more than 300,000 business properties being affected as well. Catastrophic impacts to residential, commercial and governmental property were felt along the New Jersey, New York and Connecticut coastlines, where water inundation heights approached 10 feet, Aon Benfield reports. More than nine million customers were without electricity.

Sandy’s record storm surge and excessive wave heights were the predominant cause of damage, as opposed to wind, Impact Forecasting noted during is damage survey in New York and New Jersey.

Sandy also caused significant damage outside of the U.S. In Cuba, roughly 300,000 homes and other buildings were damaged and destroyed; another 75,000 homes and structures were damaged in Hispaniola, Jamaica, the Bahamas and Canada. This is in addition to power outages and impacts to agriculture and infrastructure.

The complexities surrounding hurricane deductible triggers were highlight by Sandy. Most policies cite the issuance of tropical cyclone-based watches and warnings as a requirement for the deductible to kick into effect, the report points out, with some policies in the U.S. Northeast also mandating category 2 wind speeds to be measured for the trigger to be initiated.

In the case of Sandy, the NHC never issued tropical cyclone-based watches and warnings north of North Carolina due to its anticipated post-tropical transition before landfall, according to the report. 

“From a catastrophe modeling point of view, the primary lesson from Sandy is that not every simulated event may trigger hurricane deductibles,” according to the report’s executive summary. “This is especially true given the non-uniform and wide range of deductible triggers that different states require.

Additionally, Sandy was a highly challenging storm for modelers who did not have a similar historical or stochastic event to replicate the storm’s size and track.”

Impact Forecasting is a catastrophe model development centre within Aon Benfield whose seismologists, meteorologists, hydrologists, engineers, mathematicians, GIS experts, finance, risk management and insurance professionals analyze the financial implications of natural and man-made catastrophes around the world.