The new range is $16B to $22B, roughly double the $7B to $15B the cat modeler first estimated. Here’s why:
AIR principal scientist Tim Doggett said in a statement the increase from his firm’s earlier range was driven primarily by an increased estimate of losses from coastal flooding from Sandy’s powerful storm surge.
Such damage isn’t covered by standard home-insurance policies, and isn’t included automatically in business-insurance coverage either. AIR now estimates 20% of the commercial structures affected by the storm had flood coverage–up from its 10% assumption in its earlier estimate.
The company also said its earlier estimate assumed that home-insurance companies would impose so-called hurricane deductibles, which force homeowners to pay for more repair costs. But regulators in several states have ruled that insurers can’t enforce those deductibles, as the storm was no longer classified as a hurricane when it made landfall in New Jersey.
Estimates from Eqecat, RMS and AIR are settling into the $20B range, which would make Sandy the fourth-worst U.S. disaster in inflation-adjusted losses, according to Insurance Information Institute – after Hurricane Katrina ($46.6B), the 9/11 attacks ($23.5B), and Hurricane Andrew ($22.9B).