Holborn: Sandy Losses Might Reach $30B; Models Are Off

Independent reinsurance-brokerage firm Holborn says insured losses from Superstorm Sandy could reach $30 billion.

Thus far the highest insured-loss estimate for the Sandy has been up to $25 billion, issued by catastrophe modeler Risk Management Solutions. The unique storm struck the southern coast of New Jersey late Oct. 29.

Despite its higher predicted insured-loss total, Holborn in a recent report on the storm says, “Supply and demand for reinsurance will not be directly affected by surplus changes as a result of Sandy, even though the Northeast is many reinsurers’ peak exposure zone.”

At year’s end, industry surplus may still be higher than it was in January. However, should Sandy cause “changes to the market’s views on models, underwriting or concentrations, capacity may be reduced,” the report adds.

Holborn says Sandy is challenging the catastrophe modelers. The brokerage says modelers’ estimates of personal losses might be too high, while commercial-lines losses may be too low.

The modelers, Holborn says, are assuming low take-up of flood coverage, but also assuming that personal-lines insurers will pay some losses due to flooding because of adjuster errors or contract ambiguity.

Holborn believes this assumption is leading to an exaggeration of projected personal-lines losses.

Holborn also believes that commercial-flood take-up is higher than modelers assume.

Complicating matters, according to Holborn, is a belief that it will take a long time for insurers to settle potentially complex claims generated by the storm.

The firm breaks down insured losses by line segment as follows ($ billions):

  • Property and auto wind: $6 to $10
  • Commercial flood: $3 to $6
  • Inland Marine: $2 to $4
  • Auto flood: $2 to $3
  • Ocean Marine: $1 to $2
  • Equipment Breakdown, Boiler, Power Interruption: $1 to $2
  • Other (cancellations, workers’ comp, life, etc.): $0.5 to $1.5

Holborn adds $2 billion to $3 billion for loss and adjustment expenses—the cost to adjust claims.

Separately, the worldwide reinsurance market is expected to record losses of between $5 billion and $10 billion, says Holborn. 

Comments

Resource Center

View All »

Top 10 Legal Requirements for E-Signatures in Insurance

Want to make sure you’ve covered all your bases when adopting e-signatures? Learn how to...

Get $100 in leads with $0 down!

NetQuote's detailed, real-time leads have boosted sales for thousands of successful local agents across the...

The Growing Role of Excess & Surplus Lines in Today’s...

The excess and surplus market (E&S) provides coverage when standard insurance carriers cannot or will...

Increase Sales Conversion with this Complimentary White Paper

This whitepaper will share proven techniques - used by many of the industry's top producers...

D&O Policy Definitions: Don't Overlook These Critical Terms

Unlike other forms of insurance where standard policy language prevails, with D&O policies, even seemingly...

Environmental Risk: Lessons Learned from Willy Wonka and the Chocolate...

Whether it’s a chocolate factory or an industrial wastewater treatment facility, cleanup and impacts to...

More Data, Earlier: The Value of Incorporating Data and Analytics...

Incorporating more data earlier in claims lifecycles can help you reduce severity payments by 25%*...

How Many Of Your Clients Are At Risk Of Flood?

Every home is vulnerable to flooding. Learn four compelling reasons why discussing flood insurance with...

Gauging your Business Intelligence Analytics Capabilities and the Impact of...

Big Data, Data Lakes and Data Swamps, How to gauge your company's Big Data readiness....

Extending Contact Center Capabilities Across the Insurance Enterprise

Today advancements in technology are making a big impact on business and society. To yield...

Tech Digest eNewsletter

Technology related insights for insurance professionals including key developments, solution providers and news briefs from the carrier front – FREE. Sign Up Now!

Advertisement. Closing in 15 seconds.