Loss estimates due to Hurricane Sandy are still far from certain, but Fitch Ratings says they will likely be borne by primary insurers.
In a research note, the rating agency suggests that Hurricane Sandy has the potential to produce losses similar to Hurricane Irene, which struck the East Coast in 2011 and generated insured losses of between US$4 billion and US$5 billion. However, total storm-related costs will be dependent on the final path of the storm, it says, adding that updated estimates will likely be published as the storm progresses.
“Loss estimates for Sandy will be influenced considerably by the landfall location and actual storm path. A more northern landfall nearer to the more densely populated New York City area would potentially generate higher losses,” it says.
When those losses are realized, Fitch expects the brunt to be borne by primary insurers, including State Farm, Allstate, Liberty Mutual Group, and Travelers, based on market share positions in the Mid-Atlantic and New England regions. The likelihood of losses being allocated to the reinsurance industry increases if losses come in at the higher end of the range, it notes.
Fitch notes that Hurricane Sandy has maintained strength as a ‘category 1′ storm. It’s expected to make landfall later on Monday, and converge with a winter storm coming out of the Midwest, as well as an additional cold front emerging from the Arctic, it says. The large, slow-moving storm is expected to “generate a significant level of flooding along the coastline of the Mid-Atlantic region up through New England with substantial storm surge of up to five to 11 feet expected to follow significant rainfall and a high tide that is expected on Monday,” it says.
Additionally, states that further inland, such as West Virginia and Pennsylvania, are expected to see significant amounts of snowfall along with high winds, which carries the potential for additional property damage and power outages, it says.