Insured loss estimates from Sandy vary, could reach $15 billion

Insured loss estimates from post-tropical storm Sandy are varying between $5 billion and $15 billion, with total economic damages estimated at upwards of $20 billion in some cases.

Catastrophe modeling firm AIR Worldwide has estimated that insured losses to onshore properties in the United States will be between $7 billion and $15 billion. For residential lines, AIR estimates that insurer’s will pay out 10% of modeled storm surge damage as wind losses.

Catastrophe modelers at EQECAT Inc. have estimated economic damages of $10 billion, comparable to 2011’s Hurricane Irene, with insured losses of about $5 billion. The firm said Tuesday it is working on more refined post-event loss estimates.

U.S. economists from IHS Global Insight have estimated insured infrastructure damages to be about $10 billion, with total economic damages of $20 billion. Losses from business disruption could bring total losses up to between $30 billion and $50 billion, the company estimated.

“The commercial shutdown of the East Coast is likely to result in gross domestic product losses that may outweigh infrastructure damages,” IHS economists Gregory Daco and Nigel Gault wrote in an analysis Tuesday.

“Part of these losses will eventually be made up by reconstruction activity, but it would be naïve to put forward the view that a hurricane is in some sense a stimulus for the economy,” they added. “There’s no guarantee that reconstruction activity will be extra activity, on top of what would otherwise have occurred, rather than a substitute for that activity.”

Several modelling firms and ratings agencies have noted that the U.S. National Flood Insurance Program (NFIP) will take on the brunt of the losses from the storm.

Ratings agency A.M. Best has noted that property and casualty insurers are well-capitalized to take on losses from Sandy, mainly because this year hasn’t had many major catastrophes, especially compared to heavy losses in 2011.

Image: An escalator underwater at a New York City subway station. (Credit: Metropolitan Transportation Authority of the State of New York)