November 26, 2012 — The aftermath of Hurricane Sandy is likely to take a heavy toll on insurance companies, with the latest estimate of damages topping $22 billion in insured losses.
The estimate was reported by AIR Worldwide, one of three companies that insurance companies rely on to estimate their liability after natural disasters. If the estimate is correct, Hurricane Sandy will be the second-costliest storm in U.S. history, after Hurricane Katrina, which cost $41.5 billion in 2005.
Most of the damage from the storm was caused by flooding, which isn’t covered by standard home-insurance policies. Insurance companies are normally liable for hurricane damage, but because Hurricane Sandy was downgraded to a Post-Tropical Cyclone just before making landfall, most of the insured flood damage will be compensated by the taxpayer-funded National Flood Insurance Program (NFIP).
New York City Mayor Michael Bloomberg is currently seeking $9.8 billion from the federal government to repair infrastructure, including $5.7 billion to compensate for lost economic activity. More than 40 people died in the city. Another 10,000 were left homeless and several underground transit tunnels were flooded.
Tens of thousands of Hurricane Sandy victims have already filed claims with their insurance companies, and thousands more are expected to file claims in the coming weeks. It is likely that insurance companies will deny many of these claims.