By Sasha Ingber
The insurance industry will be dealing with fallout from Sandy for months to come. To learn more about the storm’s impact, we spoke to Franklin Nutter, president of the Reinsurance Association of America.
How much will Hurricane Sandy cost?
The estimates that have been released by a disaster-modeling firm [AIR Worldwide] for private insurance—from trees falling on homes and cars and business interruptions—range between $7 to $15 billion. This doesn’t include [estimates for] the federal flood insurance program, which are probably that or greater.
How do the costs of the damage compare to other hurricanes?
According to Environmental Studies Professor Roger Pielke at the University of Colorado, Sandy ranks as the 17th most damaging hurricane (out of 242) to hit the U.S. since 1900. Now you have much more high value properties in high-risk areas. There are more homes on barrier reefs, coastal front areas, and gulf coasts. If some of the past storms were repeated now, the damage could be much more significant.
Who foots the bill?
In terms of private insurance losses, it’s the companies that issued insurance policies.
What about the federal flood insurance program?
Because of the hurricanes of 2005, including Katrina, the national flood insurance program is in $18 billion of debt and still has not repaid this. They have issued a statement saying they have $1 billion of cash, and $3 billion for additional borrowing authority. Their losses are likely to exceed this amount so they will have to go back to Congress to increase their borrowing authority.
How will this storm affect insurance companies?
Insurance rates are regulated by states so the states have to approve the rates that are charged. It’s unlikely that individual properties will be affected.