Sandy’s Insured-Loss Tab Approaches $20B: Fitch

The insurance industry will likely see losses of $20 billion or more from Superstorm Sandy, according to a new report by Fitch Ratings this month.

Fitch based the expected total on the $16-$17 billion in loss estimates reported by individual companies thus far.

Fitch said the complexity of assessing insurance losses from such a large and intense storm over a widespread region – particularly with respect to the impact of flooding and business interruption claims – created uncertainty in estimating ultimate insured losses. As such, many (re)insurance companies didn’t release credible loss estimates until almost two months after the storm hit. And several larger insurers still haven’t released their estimates. This may potentially add $5 billion or more in losses to the industry.

Fitch said a larger proportion of losses were incurred from commercial lines versus personal lines. Primary writers with substantial Northeast catastrophe exposures are incurring the most significant losses, with reinsurers taking a more reduced, although still meaningful share. While many of the typical property lines of insurance are being impacted, it was a particularly outsized event for auto losses and marine insurance.

In nearly all cases, Sandy demonstrated the favorable spread of loss and limited concentration risk among individual insurance companies. However, despite robust modeling available for the Northeast U.S., there were several areas related to flooding risk exposure that the models did not fully capture.

Fitch said Sandy is not likely to change market underwriting capacity and tip the balance to a hard property market.

Initial reports on reinsurance pricing at the Jan. 1 renewals indicated that Sandy helped to stabilize rates, with U.S. property catastrophe pricing flat to up slightly overall, although loss impacted business saw more significant rate hikes.