Expect more Sandy-type storms
It will take a long time for the tailwinds of post-tropical cyclone (that is what it was, not a hurricane) Sandy to die down.
The superstorm caused total insured losses of anywhere between $15bn-$25bn, and the breadth of that estimate is confirmation of its massive geographical path, from Cuba and the Bahamas to Canada via the US east coast.
Latest calculations are that the storm surge and power outages carved a $2.5bn to $3bn swathe of losses in total through all marine insurance lines. Potentially $600m damage was done to Japanese and other automobiles sitting at ports awaiting onward shipment, together with containers, general cargo and warehouse contents.
While the net cost to US ports may be manageable, some Caribbean ports might end up with a proportionately bigger loss. For instance, although the Port Authority of New York and New Jersey will spend more than $2bn on repairs in its huge property portfolio across land, marine and air, insurance much of the clean-up cost will be offset by self-insurance policies combined with reimbursements from Washington agencies.
In some areas, emergency action just ahead of the October 29 blast warded off major consequences: for instance, vessels were moved up the Hudson River to ride out the storm, and deep draught ships stayed offshore. After the scare, however, many authorities are looking anew at their risk preparations for major events. There were as many as 16,000 cars sitting in one port. How can so many vehicles be moved out of danger quickly, and to where? How do you prevent flooding penetrating tiers of containers, and keep refrigerated units at the correct temperature?
As Moody’s ratings agency said in a recent Global Insurance Outlook, Sandy was not a cataclysmic event by recent standards, and pales in comparison to the 2011 Tohoku Japan earthquake in terms of loss of life, economic damage and total insured loss. Nonetheless, some big name insurers and reinsurers reported estimates of Sandy-inflicted losses that rivalled or exceeded their Japan earthquake exposures. With just a little more strength, Sandy could have caused a lot more damage to the high-value assets in its path.
It is not surprising that Sandy has blown out of the water the assumptions drawn by analysts from their catastrophe modelling. The ports industry and its insurers will have to come to terms with the statistical likelihood that Sandy-style storms will be more frequent and unwelcome visitors than previously thought.
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