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Fitch: Losses from Sandy Likely Focused on Primary Insurers

Source: Fitch

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Posted on 30 Oct 2012 by Neilson

Hurricane Sandy NYHurricane Sandy is expected to make landfall in New Jersey later today as a Category 1 hurricane with hurricane-force winds extending 175 miles from its center. Fitch Ratings anticipates losses related to Sandy will be largely borne by primary insurers, but estimates remain uncertain as the storm has yet to make landfall.

Hurricane Sandy has the potential to produce losses similar to Hurricane Irene, which struck the East Coast in 2011 and generated insured losses of between $4 billion-$5 billion. Loss estimates for Sandy will be influenced considerably by the landfall location and actual storm path. A more northern landfall nearer to the more densely populated New York City area would potentially generate higher losses.

We expect the brunt of losses to be borne by primary writers, including State Farm, Allstate, Liberty Mutual Group, and Travelers, based on market share positions in the Mid-Atlantic and New England regions. Market share was calculated based on direct written premiums and gives no consideration for reinsurance. The likelihood of losses being allocated to the reinsurance industry increases if losses come in at the higher end of the range.

Hurricane Sandy has maintained strength as a Category 1 storm through Monday morning with sustained winds of between 75 and 85 miles per hour, according to the National Hurricane Center (NHC) and has started to accelerate on a northwest path towards the East Coast. The storm is expected to make landfall later on Monday and converge with a winter storm coming out of the Midwest, as well as an additional cold front emerging from the Arctic.

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.

Further inland, states such as West Virginia and Pennsylvania are expected to see significant amounts of snowfall along with high winds, which carries the potential for additional property damage and power outages. The region has seen strong winter storm conditions in the past with large Nor'easter storms dropping significant snow and high wind levels. However, this storm is likely to have a more widespread impact than those storms that are typical to the region.

Total storm-related costs will be dependent on the final path of the storm with more updated estimates likely published on Tuesday and Wednesday.

The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article can be accessed at All opinions expressed are those of Fitch Ratings.


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