Catastrophe modeling firm AIR Worldwide says 'Superstorm' Sandywill cause between $7 billion and $15 billion in insuredlosses—possibly making the unprecedented storm the third-costliestin U.S. history.

The estimate includes wind and storm surge damage toresidential, commercial and industrial properties and contents, aswell as automobiles. Additionally, the estimate includes additionalliving expenses and business interruption. It also takes intoaccount demand surge.

And the storm system that produced Sandy isn't finishedproducing damage as it moved inland into Pennsylvania and New Yorkbefore it turns up to head to Canada.

Eqecat, another catastrophe modeler, earlier released aninsured-loss estimate from Sandy of between $5 billion and $10billion, with total economic losses of $10 billion and $20billion.

Using the high end of AIR's insured-loss range, Sandy would beeclipse 2008's Hurricane Ike as the third-costliest hurricane inU.S. history. Ike caused about $13 billion in damage to mainlyTexas and Louisiana, as well as other inland states.

If insured losses from Sandy land anywhere within the modelers'estimates, it will be known as one of the 10 costliest hurricanesever to hit the U.S.

That is, if Sandy's damages will be considered damagecaused by a hurricane. Sandy was downgraded to a post-tropicalstorm system just before it made landfall in New Jersey. This facthas one important consequence to insurers and consumers—whetherinsurers will be able to enact the hurricane deductible. Instead ofa flat deductible of, for example, $1,000 on a home valued at$200,000, a hurricane deductible if typically 2 percent of a home'svalue—or $4,000 for the $200,000 home.

Robert Hartwig, president of the Insurance InformationInstitute, says he's received word the hurricane deductible willnot apply in Connecticut, but the matter has yet to be made clearin New Jersey.

“We're trying to get clarification,” he says. “The storm wasn'ttechnically classified a hurricane, but it did have winds strongenough for a hurricane and I think hurricane warnings were still ineffect on the coast.”

Hartwig says Sandy will be remembered as one of the most notablein history—and not necessarily for its insured losses, since muchof the losses aren't insured by the private market. For example,municipalities often self-insure. State and federal property arenot insured in the private market. Flood perils are insured by thefederal government—if residents and businesses even have thecoverage.

“Think about the extent of the disruption—The New York StockExchange closing for two days [for the first time in more than 100years]; the airlines grounded; the subways and trains out ofservice,” Hartwig says. “This will go down as ameteorological legend that did something very rare. It hit aconcentrated, urban area.”

This article was originally posted at PropertyCasualty360.com,a sister site of Credit Union Times.