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Hurricane Sandy Losses Now Estimated at $18.8 Billion, Excluding NFIP Claims

Source: A.M. Best

Posted on 11 Jul 2013 by Neilson

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Hurricane Sandy claimsHurricane Sandy brought insured losses of $18.8 billion, a figure that's in the ballpark of what major catastrophe modeling firms initially suggested shortly after the October storm slammed into the Northeast U.S., according to a recent presentation given by the Insurance Information Institute's Robert Hartwig.

The figure comes from Property Claim Services and does not include claims paid by the National Flood Insurance Program, which could add another $7 billion to the tab, Hartwig said. The total, which was made up of claims from 1.52 million policyholders, makes Sandy the third most costly hurricane in U.S. history, he said, falling behind hurricanes Andrew and Katrina.

Hartwig's comments came during a presentation he gave as part of Munich Re's review of natural catastrophes in the first half of the year. Munich Re found that natural catastrophes in the first half of the year across the globe tallied insured losses of about $13 billion. Insured losses from events in the U.S. during the first six months totaled about $8 billion, with the vast majority of that coming from severe thunderstorms.

Sandy's cost fell right in the middle of the overall range of $10 billion to $25 billion given by catastrophe modelers. Eqecat gave a range of $10 billion to $20 billion, and RMS estimated $20 billion to $25 billion. AIR Worldwide pegged the losses at $16 billion to $22 billion.

Dollars paid out to commercial lines made up nearly half of Sandy's cost, according to Hartwig's presentation, but made up only about 13% of the number of claims. The average Sandy-related commercial lines payout was about $44,600, while the average homeowners' payout was about $6,600. The average vehicle claim was about $11,000 and the average NFIP payout was about $52,000.

Some claims came in less expensive than expected, leading to reserve releases that helped to elevate the underwriting performance of the U.S. property/casualty industry in the first quarter, Hartwig said. He said the industry turned in a 94.8 combined ratio for the first quarter of 2013, but he expects the figure to rise for the first half of the year when second quarter numbers come in over the next few weeks. The rise will be primarily due to increased catastrophes, he said.

"But the (first half) number will be substantially lower than what we saw in 2011 or 2012," Hartwig said. "That is largely due to lower catastrophe losses, although I will say in the first part of 2013 some of this is associated with reserve releases associated with Hurricane Sandy losses, which came in somewhat below what some insurers expected."