Hurricane Sandy may cost the insurance industry up to $20 billion, which would put this week's devastating storm second only to 2005's Hurricane Katrina for insured losses, according to a new damage estimate.
Disaster-modeling firm Eqecat Inc. said insured losses likely ranged from $10 billion to $20 billion, and said the total cost of the storm, including damage that wasn't insured by private companies, would be between $30 billion and $50 billion.
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.
Wall Street analysts had said early this week the insurance industry would have no trouble digesting the costs of the storm, but damage estimates keep climbing. Before the storm made landfall Monday, Eqecat had said insured losses could be between $5 billion and $10 billion. Another firm, AIR Worldwide, said Tuesday the storm likely caused between $7 billion and $15 billion in insured losses.
Still, property-casualty insurers are considered to be flush with cash, and several reported record profits in this year's third quarter.
Millions of people across the Northeast are still without power after Sandy swept across the most populous part of the country early this week. Eqecat said in a statement Thursday that the outages "will trigger significantly more insured losses…than were expected" from a storm of Sandy's intensity.
In addition, the closure of major roads, tunnels and the New York City subway system are likely to drive claims higher, the firm said.
At the high end of Eqecat's estimate of insured losses, Sandy would cost the insurance industry more than every hurricane but Katrina, which caused $41.1 billion in insured losses when it struck the Gulf Coast in 2005.
Hurricane Andrew, which caused $15.5 billion in insured losses in 1992, had been the second most expensive storm. The Insurance Information Institute says Andrew's pricetag is about $23 billion when adjusted for inflation.