Global reinsurance giant Swiss Re said Monday that it expects the claims burden for Superstorm Sandy could reach $900 million while catastrophe modeling firm AIR Worldwide upped its industrywide high loss estimate to $22 billion, with both firms hedging the announcements in favor a currently popular industry phrase of “higher than usual uncertainty” that could lead to upward revisions.
Swiss Re said that the $900 million estimate — net of retrocession and before tax — is based on overall market losses estimated at a range of $20 billion to $25 billion.
The reinsurer added, however, that the estimate is subject to change as the claims assessment process continues and that it is subject to an “usual” degree of uncertainty and may need to be increased.
“The hurricane hit the densely populated North-East coast of the US,” says Matthias Weber, Group Chief Underwriting Officer in a statement. “This led to prolonged power outages, disruption to public transport and damage to other infrastructure that have made recovery efforts very difficult. It also complicates the loss assessment process. Our claims estimate therefore is subject to a higher than usual degree of uncertainty and may need to be subsequently adjusted.”
AIR says that is revision from a high of $16 billion to $22 billion was driven by increased losses due to storm surge.
“The significant increase in estimated losses from AIR’s estimate issued on October 30, the day after Sandy’s landfall, is driven primarily by an increase in estimated losses from storm surge damage,” AIR said in a statement. “This, in turn, is driven by a reassessment of the percentage of flood losses that will actually be paid, as well as an improved storm surge footprint run against high-resolution industry exposure information.”
The modeling firm then added that even these significant revisions could be pushed higher as “non-modeled losses and “continuing uncertainty with respect to commercial flood coverage” are taken into account.
“Uncertainty” and “revision” have become familiar terms linked to Superstorm Sandy as catastrophe modeling firms, reinsurers and rating agencies struggle to measure their ultimate financial responsibility. Currently, insured losses estimates seem to run the billion dollar gamut.
Last week Property Claims Service (PCS) said that its initial estimate of insured losses from Superstorm Sandy was $11 billion, but could be raised significantly as claims continue to pour into the system.
Other catastrophe modeling firms have offered their estimates of losses, such as Risk Management Solutions (reportedly $22 billion) and EQECAT ($10 billion to $20 billion).
Standard & Poor’s said that insured losses for Sandy would need to exceed $50 billion in order to qualify as a capital event, but “Sandy’s unusual characteristics and coverage complexities have made determining a reasonable figure very difficult.”
Rating agency Fitch has summed up the industry anxiety surrounding Sandy claims in a recent report, arguing to may take months or even years to fully realize total insured losses.
“The level of ultimate losses for both flood and business interruption, which currently remain in flux, make the task of accurately modeling the overall insured and uninsured losses considerably more challenging.”
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