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Insurers are starting to deploy adjusters to handle claims from Hurricane Sandy. An article in the Wall Street Journal reports that “Disaster-modeling firm AIR Worldwide estimates the industry’s share of losses at $7 billion to $15 billion. At the high end of that range, Sandy would become the third-most-expensive storm for insurers in U.S. history.” Yesterday, an article in the New York Times by Mary Williams Walsh and an article in PropertyCasualty360 by Chad Hemenway reported that catastrophe-modeler Eqecat predicts total economic damages at between $30 billion and $50 billion, with insured losses between $5 billion and $10 billion. The Times reports that the top three homeowners’ insurers in New York are State Farm, Allstate and Travelers.

The reason for the large gap predicted between economic losses and insured losses is that a substantial portion of the damage is caused by flood and is either uninsured or underinsured. Flood insurance is available for homeowners from the National Flood Insurance Program, but many people buy only the amount necessary to cover their mortgage (not insuring their equity) or buy the maximum of $250,000 on a property that has a higher replacement cost (excess insurance above that amount is often available in the private market but is expensive). Insurance is often available in the private market for commercial properties, and relatively small commercial properties can be insured through the National Flood Insurance Program.

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