While one industry representative blasted states' decisions tobar insurers from invoking hurricane deductibles after superstormSandy as an act of “political expediency” that will result inhigher rates, another says he believes the state officials “actedwithin the letter of the law.”

Jimi Grande, senior vice president, federal and politicalaffairs for the National Association of Mutual Insurance Companies,says, “The uncertainty created as politicians or bureaucrats simplychange the rules makes providing coverage more difficult andexpensive for everyone.”

Furthermore, he says that “basing these decisions on a rulingfrom the National Weather Service—a ruling process with notransparency—only adds to the uncertainty.”

Grande adds, “In the face of billions of dollars in claims,insurers need to know that their contracts will stand up and arenot subject to arbitrary decision making.”

Ten states have made the call to disallow hurricane deductiblesafter the storm: Connecticut, Delaware, Maryland, Massachusetts,New Jersey, New York, Pennsylvania, Rhode Island, Vermont and WestVirginia.

Don Griffin, vice president of personal lines at the Propertyand Casualty Insurers Association of America, says PCI, afterconducting a study, has determined that regulators acted inaccordance with the law.

“Based on what we've seen, they have followed the law,” Griffinsays.

He declined to comment directly on Grande's statement, but said,“Deductibles do help keep the product available and affordable. Oneof the concerns is how they will be treated going forward.”

In this case, states acted to deny the hurricane exemption basedon a decision by the National Weather Service just before Sandy'slandfall to change its designation from a hurricane to an “extratropical cyclone.”

Industry officials contend the NWS acted despite the fact thatSandy had all the characteristics of a hurricane, which would havetriggered the deductible.

In his statement, Grande says state officials “undoubtedly meanwell, but they don't understand that what they think is helpingconsumers will ultimately hurt them in the long run by distortingthe market.”

He says that instead rejecting deductibles, “politicians—localand federal—could do far more for the communities affected by Sandyby focusing their efforts on not only rebuilding, but preparing forthe next disaster.

“One way to do so is by focusing on mitigation efforts,including stronger building codes that make our homes, offices andother structures more durable during a storm.”

He adds, “It is a shame that it can take a tragedy, buthopefully we can use this disaster to highlight the need formitigation and not actions that distort markets. Otherwise coveragefor those who need it most will become harder to find and moreexpensive to provide.”

Grande called Sandy “the largest natural disaster sinceHurricane Katrina.”

Griffin was loathe to make an estimate of the losses, notingthat anecdotal evidence from PCI member-companies indicated thatmany were still having difficulty getting their personnel tohard-hit areas.

Insurance companies are already taking a hit from Sandy. ChubbCorp, which is based in northern New Jersey and is a major playerin the U.S. northeast, suspended share buybacks because it isunsure how large its losses will be from Superstorm Sandy.

Credit Suisse analysts said the reaction to the Chubb decisionby stock markets indicates that a Sandy loss of more than $30billion is being factored into the stock prices of property andcasualty insurers and reinsurers.

Sandler O'Neill analysts projected the total loss to insurersfrom the storm at $20 billion.