Sandy may cost the insurance industry up to $25 billion, according to a new estimate that provides the largest potential price tag for the storm so far.Disaster-modeling company Risk Management Solutions Inc. has begun telling clients that Sandy caused an estimated $20 billion to $25 billion in insured losses when it struck the most densely populated part of the country two weeks ago.
That is higher than earlier estimates from Risk Management Solutions' two main competitors, AIR Worldwide and Eqecat, and would mark Sandy as second only to 2005's Hurricane Katrina for insured losses.
Eqecat predicted on Nov. 2 that the insurance industry is likely to pay out between $10 billion and $20 billion.
Insurance industry executives, Wall Street analysts and ratings companies have been saying the insurance industry should have no trouble digesting the costs of the devastating storm. While the potential price tag keeps climbing, Moody's Investors Service has said it would take about $50 billion in losses before most insurers began to feel a significant bite.
Estimates from Eqecat and other disaster-modeling firms are tracked closely by the insurance industry for the early indications they give on the likely costs of major disasters. The insurers themselves likely won't have a full understanding of the true costs of the storm for weeks or months.
Kevin O'Donnell, the global chief underwriting officer at RenaissanceRe Holdings Ltd. discussed the Risk Management Solutions estimate on a conference call to discuss Sandy's impact, hosted by Evercore Partners Inc.
A spokeswoman for RMS confirmed the number, and added that the company hadn't released the figure publicly because it is in the process of "working with our clients to help them to determine the impact of Sandy."