Hurricane Sandy: Could Be One of Nation's Costliest to Insurers
Catastrophe modeler Eqecat says it expects Hurricane Sandy will cause up to $10 billion in losses for the insurance industry.
Eqecat puts total economic damages from Sandy at between $10 billion and $20 billion, with insured losses between $5 billion to $10 billion.
At the low end of Eqecat's estimate, Hurricane Sandy would become one of the ten costliest hurricanes in the United States, according to the Insurance Information Institute.
Currently 2011’s Hurricane Irene is the 10th costliest at $4.3 billion. Irene affected many of the same areas as Sandy is expected to when the storm makes landfall late Monday. However, Irene was downgraded to a tropical storm before it reached the Northeast. Sandy is expected to remain a Category 1 hurricane at landfall, with wind gusts of up to 90 mph.
If damage from Hurricane Sandy reaches the higher end of Eqecat’s estimate, the storm would become known as one of the five costliest U.S. hurricanes ever.
Hurricane Charley, which battered Florida and the Carolinas in 2004, caused $8.75 billion in insured losses in today’s dollars. Charley is currently ranked as the 5th costliest U.S. hurricane—behind 2005’s Wilma, which caused $11.67 billion in insured losses.
Modeler Risk Management Solutions (RMS) says the regions likely to be most affected by Sandy—the coast Mid-Atlantic—are not very densely populated, but do contain a “very high amount of insured exposure.”
Hundreds of thousands of people have been ordered to evacuate in New York City. Storm surge in New York could flood lower Manhattan, including subway tunnels. Floods could significantly damage the city’s network of electrical and communications lines.
A state of emergency has been declared in nine states.
Sandy is a challenge to modelers, since it is such a unique event—a combination of several weather patterns with the potential to produce "an interesting mixture of hazards," says Michael Kistler, director of model solutions at RMS. "We are looking at a very broad wind field," he says, adding the possibility of losses from flood and even some predicted snow in West Virginia, Virginia, Maryland and Pennsylvania.
This article was originally posted at PropertyCasualty360.com, a sister site of Credit Union Times.
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