Insurance implications due to damage to infrastructure from Superstorm Sandy are difficult to know at this point, but most infrastructure is not privately insured.
Meyer Shields of Stifel Nicolaus recently said insured losses from Sandy could be higher than modelers' estimates once infrastructure losses are added.
Sandy's storm surge and high winds wreaked havoc on the New York and New Jersey train systems. Buses were also shut down for some time after the storm. Roads were washed away in some places, and the entire Northeast succumbed to massive power outages. Not to mention damage to municipal, state and federal buildings, airports and harbors.
But Tom Larsen, senior vice president at catastrophe modeler Eqecat, says the firm "generally views infrastructure in the U.S. as uninsured."
Robert Hartwig, president of the Insurance Information Institute, says he isn't aware of private insurance for infrastructure such as roads that were damaged or destroyed during Sandy. They are typically owned by city, county or state governments, he says.
Private insurance could be purchased on structures such as municipal buildings and schools–or they belong to a self-insured group–but Hartwig says he is unaware of any private insurance for these types of properties in New York City.
A story in Bloomberg Businessweek reports New York's MTA started its own captive insurer, First Mutual Transportation Assurance Co., in 1997. It covers the first $25 million in property damage before falling back on up to $1 billion in additional coverage from reinsurers. After that, the MTA will rely on Uncle Sam. And it is likely, according to officials, that the cost to fix the New York Transit system will certainly eclipse $1 billion.
New Jersey Transit could not immediately provide details about its insurance structure.
Ronald Morano, spokesman for Jersey Central Power & Light, a FirestEnergyCo., says he didn't know if any repair costs would be recovered via insurance. Morano says the utility defers the cost of repairs from the storm, but later it could ask officials to recoup some or all of the costs with rate hikes. Typically, power lines are not insured, say experts.
Larsen says the "advent of private toll roads has led to some infrastructure projects having private insurance," but "damage to roadways has not been sufficiently extensive to cause large insured losses."
Municipal bonds, as well as taxpayers and other fees, fund a lot of infrastructure projects and Larsen says he's heard some payments could be missed. Some of the bonds are insured but a loss here can not be equated to a property insurance loss. "A skipped payment is made up by extending the duration of the loan," Larsen explains.
Damage to infrastructure will be blamed for business interruption claims, the industry has said. Some business interruption policies include endorsements for loss of utilities, says Larsen. And because of the extent of damage, repairs were, or remain, delayed.
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