Sandy devastated the non-hurricane prone Northeast and, for good measure, it left a blizzard in West Virginia. Preliminary estimates are as high as $20 billion, and this number is only for insured losses. To add insult to injury a Nor’easter left behind record snowfall totals from New Jersey to Maine just 8 days later. However, the impact on insurance rates is not likely to be significant despite the estimates of it being the third costliest storm in U.S. history.
First, 2012 has been a relatively quiet year for catastrophes prior to Hurricane Sandy so the overall impact, particularly on the reinsurance market, might be somewhat average.
Second, the insurance market was already ‘tightening up’ due to record catastrophic losses from 2010 and 2011. Even though this storm will add to that affect, pricing was already moving in that direction and it won’t have a severe impact.
According to Standard & Poor’s Ratings Services, Sandy is expected to have only limited impact on (re)insurers’ fourth-quarter earnings in 2012 and the hit will be offset by strong capital bases and strong earnings through the first three quarters of 2012.
This position is supported by Fitch Ratings’ Report that noted the property/casualty insurance market is experiencing broad improvement in insurance premium rates across most segments. Based on Fitch’s sensitivity analysis, Sandy is not likely to tip the balance to a hard property market, but is more likely to promote continuation of current pricing trends in 2013, particularly in U.S. property markets.