Es­ti­mate of eco­nomic losses now up to $50bn

“Losses from the storm could to­tal $30 bil­lion to $50 bil­lion, ac­cord­ing to Eqecat, which tracks hur­ri­canes and an­a­lyzes the dam­age they cause.”

The Pak Banker - - Front Page - Mary Wil­liams Walsh

ECO­NOMIC dam­ages in­flicted by Hur­ri­cane Sandy could reach $50 bil­lion, ac­cord­ing to new es­ti­mates that are more than dou­ble a pre­vi­ous fore­cast. Some economists warned on Thurs­day that the storm could shave a half per­cent­age point off the na­tion's eco­nomic growth in the cur­rent quar­ter. Gasoline Runs Short, Adding Woes to Storm Re­cov­ery (Novem­ber 2, 2012) Staten Is­land Was Tragic Epi­cen­ter of Storm's Ca­su­al­ties (Novem­ber 2, 2012).

Losses from the storm could to­tal $30 bil­lion to $50 bil­lion, ac­cord­ing to Eqecat, which tracks hur­ri­canes and an­a­lyzes the dam­age they cause. On Mon­day, be­fore the storm hit the East Coast, the firm es­ti­mated $10 bil­lion to $20 bil­lion in to­tal eco­nomic dam­ages.

The flood­ing of New York's sub­ways and road­way tun­nels and the ex­ten­sive loss of busi­ness as a re­sult of util­ity fail­ures across the re­gion were be­hind the sharp in­crease in the es­ti­mate, the firm said. "The ge­o­graphic scope of the storm was un­prece­dented, and the im­pacts on in­di­vid­u­als and on com­merce are far larger," said Tom Larsen, Eqecat's se­nior vice pres­i­dent and prod­uct ar­chi­tect. "Lost power is go­ing to con­trib­ute to higher in­sur­ance losses."

Eqecat pre­dicted that New York would bear 34 per­cent of the to­tal eco­nomic losses, with New Jersey suf­fer­ing 30 per­cent, Penn­syl­va­nia 20 per­cent and other states 16 per­cent. That in­cludes all es­ti­mated losses, whether cov­ered by in­sur­ance or not. The es­ti­mates and the share that will be cov­ered by in­sur­ers are far from cer­tain at this point, as gov­ern­ment of­fi­cials, prop­erty own­ers and in­sur­ance ad­justers strug­gle to as­sess the de­struc­tion.

While the stock mar­ket, banks and other fi­nan­cial in­sti­tu­tions re­gained some of their stride on Thurs­day, other sec­tors like retailing, trans­porta­tion and leisure and hos­pi­tal­ity face a much longer and more dif­fi­cult re­cov­ery. With fuel in short sup­ply in many ar­eas and util­i­ties warn­ing that power may not be back for a week or more in some ar­eas, busi­nesses found them­selves pre­par­ing for the equiv­a­lent of a long siege.

FedEx, for ex­am­ple, was try­ing to rent fuel tankers for its trucks in New York and New Jersey as com­mer­cial gas sta­tions ran dry. "We're reach­ing out to ev­ery­one who has a gasoline tanker that we can move to these ar­eas," said Shea Le­ordeanu, a spokes­woman for the com­pany. While FedEx had stocks of oil in ad­vance of the storm for gen­er­a­tors, it was not pre­pared for the gas short­ages that caused long lines at sta­tions on Wed­nes­day and Thurs­day.

"There has not been an im­pact yet, but this is some­thing we can see as an is­sue and we're con­cerned," she said.

As lo­gis­ti­cal prob­lems mounted, and dam­age es­ti­mates surged, economists raised their es­ti­mates of the storm's im­pact. "I think the ef­fect will be quite big," said Ju­lia Lynn Coron­ado, chief econ­o­mist for North Amer­ica at BNP Paribas. "In the fourth quar­ter, we're prob­a­bly look­ing at an im­pact of half a per­cent­age point." She said some of those losses would be made up in the first quar- ter of 2013, as in­sur­ance re­im­burse­ments were dis­trib­uted and home­own­ers and busi­nesses re­built.

Hur­ri­cane Sandy will rank high among dis­as­ters in terms of eco­nomic im­pact but will not be at the top of the list, said Mark Zandi of Moody's An­a­lyt­ics. He es­ti­mated that the losses would be less than half of those suf­fered be­cause of the 9/11 ter­ror­ist at­tacks and from Hur­ri­cane Ka­t­rina.

Moody's An­a­lyt­ics also put the im­pact in the $50 bil­lion range, with about $12 bil­lion in losses fall­ing in the New York City metropoli­tan area.

About $20 bil­lion of that to­tal is from lost eco­nomic ac­tiv­ity like meals not served in restau­rants, can­celed plane flights and bets not placed in casi­nos, Mr. Zandi es­ti­mated. The rest, about $30 bil­lion, will be from prop­erty de­struc­tion, in­clud­ing dam­age to homes, cars and busi­nesses, Mr. Zandi said.

Eqecat said it be­lieved that var­i­ous forms of in­sur­ance would cover $10 bil­lion to $20 bil­lion of the to­tal cost. Other losses will be borne by in­di­vid­u­als and busi­nesses, or cov­ered by fed­eral gov­ern­ment pro­grams like the Na­tional Flood In­sur­ance Pro­gram. Much of the fed­eral spend­ing will be used to re­pair dam­aged pub­lic in­fra­struc­ture, rather than for pri­vate prop­erty.

Eqecat said that if in­sured costs re­mained at the lower end of its pre­dicted range, at $10 bil­lion, then about 60 per­cent of the losses would be cov­ered by home­own­ers' and, to a lesser ex­tent, auto in­sur­ers. The re­main­der would be cov­ered by com­mer­cial and in­dus­trial in­sur­ance.

The firm's of­fi­cials said that if to­tal in­sured losses rose to the higher end of its pre­dicted range, it would be be­cause of costs like busi­ness-in­ter­rup­tion losses - and in that case, com­mer­cial in­sur­ers pay more.

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