Sandy left a wide path of destruction in her wake when it slammed the U.S. North East.
Although residents of the North Eastern United States had been hoping for the best, the hurricane insurance losses resulting from Sandy will likely hit the $5 billion mark and above.
Insurers and others in the industry are already crunching the numbers from the “frankenstorm”.
Even before beginning to perform these calculations, it was clear to the hurricane insurance industry that the numbers would run well into the billions. Fitch Rating, for example, said that the winds from this enormous storm breached 85 miles per hour. The winds alone could lead to losses as high as $5 billion.
The brunt of those losses will be faced by the top hurricane insurance companies across the country.
Insurers such as Allstate, State Farm, Liberty Mutual Group, and Travelers will likely have to take on the majority of the costs. According to the statement released by Fitch, “Hurricane Sandy’s large size and generally slow movement is expected to generate a significant level of flooding along the coastline of the Mid-Atlantic region up through New England with substantial storm surge of up to 5 to 11 feet expected to follow significant rainfall and a high tide that is expected on Monday.”
Leading disaster cost assessment firm, Kinetic Analysis Corp. has predicted even higher losses, saying that the hurricane insurance claims could reach up to $6.3 billion. Insurers around the world have been boosting the amount of capital that they are setting aside as a result of the growing concerns that are being faced regarding storms that can lead to very high losses when they are worse than predicted.
Though it is typically the primary hurricane insurance companies that bear the brunt of the losses, the trend is for everyone across the industry to start to protect themselves against worst case scenarios by purchasing reinsurance coverage. At the moment, primary insurers are indicating that the losses are still well within their limits, but at this early point, only limited details are available for determining what the actual losses will be and how much of a role the reinsurers will have to play.