Insurers have the logistic and financial resources to handleHurricane Sandy, says Robert Hartwig, president of the InsuranceInformation Institute.

“Catastrophe losses are down 40-50 percent through the thirdquarter [compared to last year],” says Hartwig. “Even with lossesfrom Sandy, 2012 catastrophe losses will still be well below2011.”

The hurricane has strengthened to include winds of 85 mph andthere has already been some flooding in the New York Metro area asresidents await the storm's landfall this evening. At the storm'speak, 70-90 mph wind gusts are expected and up to 11-foot stormsurges will result in severe flooding. The storm's enormouswind field and its predicted slow movement is expected to affectmuch of the Northeast and Mid-Atlantic states.

It has yet to be determined—and it is difficult topredict—whether Sandy will be remembered as a wind or flood event.There is no coverage for flooding, or flooding from storm surge, instandard Homeowners, Renters or in most Commercial Propertyinsurance policies. Flood damage to vehicles is covered under thecomprehensive section of an Auto insurancepolicy.

“It will be interesting to see if Sandy causes high-severityclaims, rather than the high number of low-severity claims seenafter Hurricane Irene,” Hartwig says. Irene struck the Northeast inlate August 2011. Though it was mostly a flooding event, Irenestill caused an estimated $4.3 billion in insured damage—enough torank the storm as the 10^th costliest in U.S.history.

“I think insurers are better prepared than they were a year ago,because of Irene,” Hartwig says, adding that insurers are settingup staging areas in Western New Jersey and Pennsylvania in order toquickly respond to the most heavily-damaged areas when the stormpasses.

Interestingly, unlike Irene, it appears insurers will be able toenact hurricane deductibles since Sandy will make landfall as ahurricane. Irene was downgraded to a tropical storm just before itmade landfall a year ago and officials in some states orderedinsurers to waive the deductibles, which are typically 2 percent ofa home's insured value but can vary from state to state, orcontract to contract, Hartwig notes.

This could act to keep insured losses down somewhat, sincehurricane deductibles are higher than flat-rate deductibles. Forinstance, a home with a value of $200,000 may have a flatdeductible of $1,000, but a 2 percent hurricane deductible is$4,000.