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Potential insurance losses from Sandy


Alekbaylee
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http://www.businessweek.com/news/2012-10-29/european-insurers-drop-as-u-dot-s-dot-prepares-for-hurricane-san

 

Insurers including Travelers Cos., Swiss Re AG (SREN) and Munich Re fell as the U.S. east coast prepared for Hurricane Sandy, which may cost the industry as much as $6.3 billion, according to Kinetic Analysis Corp.

 

Claims may be about $3 billion should the winds remain a relatively weak Category 1 storm, Croce said. At that level the losses are unlikely to reach reinsurance limits, meaning claims will be borne by primary insurers, he said.

 

Primary insurers such as such as Allstate and Travelers typically buy reinsurance from firms including Munich Re and Swiss Re to protect themselves against losses. Lloyd’s of London insurers such as Catlin sell both primary insurance and reinsurance.

 

Insurers’ capital reserves remain “fat” as they have not had to pay for any severe losses in 2012, according to Eamonn Flanagan, a Liverpool, England-based analyst at Shore Capital Group Ltd. (SGR) Firms such as Beazley Plc (BEZ), Hiscox Ltd. (HSX) and Lancashire Holdings Ltd. (LRE) may reduce planned capital returns to shareholders to pay for losses and take advantage of higher premium rates following the storm, he said.

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So far it appears to be mainly a very heavy rain event, with high winds...but not crazy-high winds.  Most places on the North Atlantic shore are accustomed to getting 60 mph winds once or twice per year, so 75 or 80 isn't a huge stretch.  As I recall, $6.3b of insurable damage would put it roughly on par with just one of the four horsemen of 2004 (Charlie, Ivan, Francis and Jeanne), so the forecast damage level will be barely a blip for insurers.

 

But it is going to be a big storm, and the north east will probably be basically shut down for a few days....

 

 

SJ

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http://www.businessweek.com/news/2012-10-29/european-insurers-drop-as-u-dot-s-dot-prepares-for-hurricane-san

 

Insurers including Travelers Cos., Swiss Re AG (SREN) and Munich Re fell as the U.S. east coast prepared for Hurricane Sandy, which may cost the industry as much as $6.3 billion, according to Kinetic Analysis Corp.

 

Claims may be about $3 billion should the winds remain a relatively weak Category 1 storm, Croce said. At that level the losses are unlikely to reach reinsurance limits, meaning claims will be borne by primary insurers, he said.

 

Primary insurers such as such as Allstate and Travelers typically buy reinsurance from firms including Munich Re and Swiss Re to protect themselves against losses. Lloyd’s of London insurers such as Catlin sell both primary insurance and reinsurance.

 

Insurers’ capital reserves remain “fat” as they have not had to pay for any severe losses in 2012, according to Eamonn Flanagan, a Liverpool, England-based analyst at Shore Capital Group Ltd. (SGR) Firms such as Beazley Plc (BEZ), Hiscox Ltd. (HSX) and Lancashire Holdings Ltd. (LRE) may reduce planned capital returns to shareholders to pay for losses and take advantage of higher premium rates following the storm, he said.

 

Sandy appears to be likely mostly to affect insurers and those reinsurers that have lower attachment points on the coverage they write.  Storm surge may cause the most damage followed by less than extreme but widespread windstorm damage.  Extensive snowfall away from the coast should also produce claims.  In summary, primary insurers should be affected the most, followed by reinsurers with relatively low attachment points on coverage with reinsurers with high attachment points affected least.

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I suspect that whilst damage might be light there could be qute a few claims for business interuption - and the longer it take to restore power and do repairs then the higher it will go.

It could turn ugly very quickly.

 

as mentioned the good news is that there hasn;t been any other major weather losses in the USA in this storm period.

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http://www.businessweek.com/news/2012-10-29/european-insurers-drop-as-u-dot-s-dot-prepares-for-hurricane-san

 

Insurers including Travelers Cos., Swiss Re AG (SREN) and Munich Re fell as the U.S. east coast prepared for Hurricane Sandy, which may cost the industry as much as $6.3 billion, according to Kinetic Analysis Corp.

 

Claims may be about $3 billion should the winds remain a relatively weak Category 1 storm, Croce said. At that level the losses are unlikely to reach reinsurance limits, meaning claims will be borne by primary insurers, he said.

 

Primary insurers such as such as Allstate and Travelers typically buy reinsurance from firms including Munich Re and Swiss Re to protect themselves against losses. Lloyd’s of London insurers such as Catlin sell both primary insurance and reinsurance.

 

Insurers’ capital reserves remain “fat” as they have not had to pay for any severe losses in 2012, according to Eamonn Flanagan, a Liverpool, England-based analyst at Shore Capital Group Ltd. (SGR) Firms such as Beazley Plc (BEZ), Hiscox Ltd. (HSX) and Lancashire Holdings Ltd. (LRE) may reduce planned capital returns to shareholders to pay for losses and take advantage of higher premium rates following the storm, he said.

 

Sandy appears to be likely mostly to affect insurers and those reinsurers that have lower attachment points on the coverage they write.  Storm surge may cause the most damage followed by less than extreme but widespread windstorm damage.  Extensive snowfall away from the coast should also produce claims.  In summary, primary insurers should be affected the most, followed by reinsurers with relatively low attachment points on coverage with reinsurers with high attachment points affected least.

 

 

Ed Noonan says that very little reinsurance will kick in until losses reach $10B, substantially above most estimates.  He says that the largest claims could come from the low lying industries in NJ south of Manhattan.

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