HARTFORD, Conn. (CBS Connecticut) — The economic effect left from the devastation Hurricane Sandy had on New Jersey shore towns, New York and other surrounding areas is expected to climb to $10 billion for U.S. insurance companies.
EQECAT, a risk-modeling agency for insurance and reinsurance companies that helps project losses and payouts during natural disasters, has indicated that the damage caused by Hurricane Sandy will result in insurance companies paying out between $5 billion to $10 billion to those affected by the storm. The projected insured losses, which were released Monday, also included an estimated $10 billion to $20 billion in total economic recovery needed to make up for Sandy’s damages.
Even with the presidential election just six days away, the aftermath of the storm, which has left 55 people dead and another 8 million from Maine to South Carolina without power, has helped pen a new chapter to the old story of North America’s ability to handle and recover, at least financially, from violent natural disasters on its coasts.
“We have a new reality when it comes to these weather patterns,” New York Gov. Andrew Cuomo said in a press conference Tuesday. “We have an old infrastructure and we have old systems, and that is not a good combination.”
But even before Sandy made landfall, questions were raised within the insurance industry as to whether the current infrastructure of the U.S. insurance system is ill-suited to handle the current climate challenges that have led to some of the more violent natural disasters in the past decade. A report released just two weeks prior to Sandy from Munich RE, a reinsurance presence in Germany, found that North America’s vastly-populated coasts and the effect that climate change has on altering the formations and strength of tropical cyclone intensity should lead to a rethinking of how insurance agencies go about projecting weather-related damage. According to the report, there has been $1 trillion in weather-related damage in the U.S. since 1980, with about $500 billion being distributed in insured losses during that same time.
“Nowhere in the world is the rising number of natural catastrophes more evident than in North America,” the report noted.
For those homeowners with shore owners who took out hurricane deductibles, their insurance could be in the tens of thousands of dollars. According to CNNMoney, homeowners who take out hurricane deductibles are forced to pay 1 to 5 percent of the home’s value up front. Insurers in 18 states are allowed to charge for this insurance, including in New Jersey and New York, two of the states hardest hit from Sandy. Insurance for homeowners could take up to a month before it kicks in, according to the Washington Post.
Today, President Barack Obama will inspect the damage of New Jersey shore towns around Atlantic City with New Jersey Gov. Chris Christie, while Mitt Romney is scheduled to continue hurricane relief efforts.