Hurricane Sandy Insured Losses - Initial Pre-Landfall Estimate $5 - 10 Billion


Sandy has strengthened to a strong Category 1 hurricane within the last 12 hours, the maximum wind speeds are now 90 mph. Sandy is a massive storm with tropical storm winds extending out to 970 miles in diameter. Sandy's impact is not only expected to be widespread but also expected to penetrate into inland counties; the NHC reports a 70 percentile confidence bounds of 60 mph wind speeds impacting almost 250 miles of coast, from the Maryland shore to New York City, and penetrating inland as far as Harrisburg, PA. A population of approaching 50 million is expected to be affected by the storm, with a large concentration along the coast. Hurricane Sandy is expected to cause significant damage in New Jersey, Delaware, Virginia, and Pennsylvania.

EQECAT's initial pre-landfall economic damage estimate for this event is about $10 - 20 billion dollars, or comparable to Hurricane Irene (2011) at $10 billion. The pre-landfall insured loss estimate for this event is $5 - 10 billion dollars. At this point in time, the loss could easily be above or below this number.

Sandy is about 260 miles south-southeast of New York City, and based on the latest forecast track, the center is expected to cross the coast in southern New Jersey tonight. A weather system from the north is expected to slow Sandy down shortly after landfall, keeping storm winds on the coast for longer, relative to a typical hurricane or transitioning storm. Strong winds and rising sea levels are already affecting areas along the coast this morning, Monday, October 29, well in advance of the center crossing the coast tonight. Rainfall and storm surge will be large contributing factors for Sandy, with storm totals of 10 inches (25 cm) forecast for some areas along the track. A full moon is producing large tidal fluctuations which are exacerbating the surge effects at the coast.

Impact of Sandy based on observations of past hurricanes

The maximum winds from hurricane Sandy are expected to produce isolated pockets of torn rooftops, windows broken from airborne debris and falling trees and shrubs, equating to an average damage very close to insurance deductibles. The extraordinarily large footprint of strong winds from Sandy are contributing to the loss estimate.

Damages to insured properties from Sandy will endure over several days, beginning now and extending into Wednesday as Sandy slows and persists over southern and central Pennsylvania. Observations of past events lead to the expectation of a widespread incidence of relatively low levels of damage. The damage (and ensuing insured losses) are likely to be distributed over a broad set of insurance companies, generally by market share. The relationship of losses to retention levels will vary from company to company, especially between the national carriers and the regional carriers.

Most of the damage is expected to comprise of housing and general commercial occupancies. Newer commercial and industrial occupancies are expected to benefit from improvements to building codes and receive less damage, although chaotic winds could produce pockets of higher damage. Sandy is expected to cause widespread incidents of localized flooding. Storm surge along the coast has already produced reports of flooded streets in some areas, all consistent with EQECAT's economic damage estimate.

Economic damages include property damage from wind, rain and flood, and also include intangibles such as business interruption and additional living expenses. Damage to infrastructure utilities include roads, water and power, and municipal buildings which may or may not be insured. Economic damages are by their very nature very approximate.

Recent events have demonstrated a pattern that approximately half of the economic damages are covered by private insurance companies, with the remainder covered by NFIP or uninsured and borne by the property owners. Based upon this pattern, insured losses could be $5 billion.

Storm Surge Impacts

Sandy's winds will have a long, sweeping overwater fetch, with an extended duration of strong onshore winds, which will enhance the height and duration of surge levels. With the center of Sandy still well offshore, water levels along the East Coast have already begun to rise. High storm surge levels, from 6 to 11 feet, are possible in some areas. The duration of storm-generated elevated water levels may span the tide cycle, so that some surge occurring at high tide is likely. The moon is almost full, which will also add to a stronger than average high tide. Some forecast peak surge levels, if occurring at high tide, are:

North Carolina: north of Surf City including Pamlico/Albemarle Sounds 4 to 6 ft
Southeast Virginia, the DelMarVa (Delaware/Maryland/Virginia) area 2 to 4 ft
Long Island Sound, Raritan Bay, and New York Harbor 6 to 11 ft
Elsewhere from Ocean City, MD, to the CT/RI border 4 to 8 ft
CT/RI border to the south shore of Cape Cod 3 to 6 ft
Hurricane Sandy Storm Surge Probabilities - October 29, 2012

Hurricane Sandy Storm Surge Probabilities - October 29, 2012
Source: National Hurricane Center (NHC)

New York Area

New York City shut down the subway system on Sunday evening due to the potential for flooding of the underground tunnels. New York Harbor is particularly susceptible to high surges and flooding, since the geographic configuration of the coastline between New Jersey and Long Island meets at a roughly 90-degree angle. Strong onshore winds can funnel large volumes of water "into the corner" where New York Harbor is located, allowing for increased surge levels. The same situation may occur in western Long Island Sound given strong easterly winds. In the latest forecast, these two areas have the highest surge potentials of up to 11 feet. According to the NY Office of Emergency Management, the last time New York Harbor saw a storm tide near 11 feet was 52 years ago with Hurricane Donna. Sandy's storm tide has already begun to raise coastal water levels. This morning's high tide at New York's Battery Park was 8.4 feet, over 1.5 feet above flood stage. High tide occurs this evening in the New York – New Jersey metropolitan area between 9-10 pm EDT, just around the time high surge levels are expected.

Sandy's Wind Field

Sandy's wind field is expansive, with hurricane force winds extending outward up to 175 miles southwest of the center, and tropical storm force winds extending out 485 miles from the center. Because of this very large wind field, tropical storm conditions are already reaching much of the Mid-Atlantic and southern New England coasts, with hurricane force wind gusts expected later this afternoon. Unlike a typical hurricane, where maximum winds around the eye may extend out 20-30 miles from the center, the maximum winds in Sandy were found to be over 100 miles from the center by and Air Force Reconnaissance flight this morning.

Surface Wind Field of Hurricane Sandy - October 29, 2012

Surface Wind Field of Hurricane Sandy - October 29, 2012
Source: National Hurricane Center (NHC)


Rainfall amounts of 4 to 8 inches are expected over portions of the Mid-Atlantic states, including the DelMarVa Peninsula (Delaware/Maryland/Virginia), with isolated maximum amounts of 12 inches possible. Rainfall amounts of 1 to 3 inches, with isolated maximum amounts of 5 inches possible, are expected from southern New York state, northeastward through New England. Snowfall accumulations of 2 to 3 feet are expected in the mountains of West Virginia, with 1 to 2 feet expected for the mountains of southwestern Virginia.

Hurricane Sandy Potential Storm Track- October 29, 2012

Hurricane Sandy Potential Storm Track- October 29, 2012
Source: National Hurricane Center (NHC)

At 11 am EDT Monday, October 29, 2012, Sandy was located about 205 miles southeast of Atlantic City, and approximately 260 miles south-southeast of New York City (near at latitude 37.5N, longitude 71.5W). Sandy strengthened over the past 12 hours, and maximum sustained winds have increased to 90 mph, a high Category 1 hurricane. The storm is moving toward the north-northwest at 18 mph, and a turn to the northwest is expected this afternoon. Sandy is transitioning into an extra-tropical cyclone, and tonight the broad center of the storm is forecast to make landfall in southern New Jersey, though high impacts from high winds and surge will occur many hours before the center reaches the coast. Following landfall, Sandy is expected to weaken to tropical storm status by tomorrow morning. A slowing of its forward motion is then forecast to keep the system in Pennsylvania and upstate New York through Wednesday morning, October 31.

EQECAT will continue to monitor this event and provide updates as more information becomes available.

Engineering Risk and Site Evaluations

EQECAT Inc. and ABS Consulting are part of the ABS Group of Companies. ABS Consulting offers on-site risk assessments, evaluations and structural engineering services with more than 1,800 employees worldwide. ABS Consulting engineers and scientists use EQECAT catastrophe risk models to provide risk assessments, in addition to having performed inspections or repairs after more than 100 earthquakes and 25 major windstorms. Learn more about ABS Consulting's natural hazard risk assessment capabilities.

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