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US storm damage set to cost $20bn

Oct 31 2012 08:52 AFP
Hurricane Sandy

Hurricane Sandy (Picture: AFP)

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New York - Bill Keogh, president of disaster estimator Eqecat, confirmed the company's estimates of $5bn to $10bn in insured losses and $10bn to $20bn in total losses from Hurricane Sandy, which came ashore in New Jersey late on Monday and swept northward, knocking out power for more than eight million customers and shutting down four major cities.

"We think that's about right. ...It will be among the 10 to 15 most damaging storms" that have hit the United States, he told Bloomberg television.

He said the assessments on real damages from wind and flooding-related losses and the costs of business shutdowns will take some time to collect.

"At this stage we're really just getting out facts from the ground... That will take a while."

Fitch Ratings said that aside from physical damage from winds and flooding, it expects significant insurance claims from companies over lost business.

"While many lines of insurance will be affected, including property and auto, there is the potential for significant business interruption and contingent business interruption losses related to the flooding as the affected areas work to restore power and resume operations following the storm," Fitch said.

"The massive storm is impacting a wide variety of businesses in densely populated areas, including retail, corporate offices, transportation, manufacturing, and energy plants."

Economists at IHS Global Insight said they expect the physical losses to top the $15bn of Hurricane Irene of last year.

"With Sandy being a much larger storm, it is likely to end up causing more flooding damage than its 2011 peer which would increase total damage estimates," said IHS economists Gregory Daco and Nigel Gault in a report on the storm.

"The commercial shutdown of the East Coast is likely to result in gross domestic product losses that may outweigh infrastructure damages," they added.

While some losses to economic production will be recovered in rebuilding spending, they said, not all can be regained.

Combining all of the disruptions from Sandy, they said, "early estimates point toward total economic losses of around $30bn to $50bn."

That was still small compared to the $120bn in economic damage wrought by Hurricane Katrina, which devastated the US Gulf of Mexico coastline in 2005, but still enough to reduce the economic growth rate in the fourth quarter by 0.6% points, they said.


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