As a point of comparison, Hurricane Irene, which hit New Jersey and Vermont the hardest, caused about $4.3 billion in insured losses last year. Sandy is sure to top that, but it still pales compared to 2005, when Hurricanes Katrina, Rita and Wilma combined for insured losses of $60 billion. Katrina accounted for $45 billion of that number.
To give a sense of Sandys massive reach, President Barack Obama signed emergency declarations for New York, Massachusetts, Connecticut, Rhode Island, New Jersey, Pennsylvania, Maryland, Virginia, West Virginia and the District of Columbia. Claims for damages are expected to range from flooding and wind damage to business interruption to losses from a blizzard in western Maryland and West Virginia.
To make matters worse, gasoline prices are expected to rise, at least in the near term.
In addition to infrastructure damage, Sandy has forced the idling of about 70 percent of the East Coasts oil refineries, said Gault and Daco. This does not bode well for the supply of refined oil products as capacity was already quite tight prior to the shutdowns. We are likely to see an accumulation of crude supply and a shortage of refined products in the coming days which will inevitably put upward pressure on gasoline prices.
In the days ahead, attention will shift to the National Flood Insurance Program, which was in trouble far before Sandy, only the fifth named hurricane in the past 20 years to come ashore in the final three months of a calendar year.
That particular program was about $19 billion under water itself in 2010, and 2011 continued at that same rate, said McHale from Ceres. It never financially recovered after Hurricane Katrina. They simply dont have the wherewithal to pay out. It is an insolvent government-run program, which is ultimately a huge taxpayer liability.
On a conference call with reporters, Craig Fugate, director of the Federal Emergency Management Agency, confirmed that the flood-insurance program his office administers still owes about $17 billion in debt assumed to pay out claims from Hurricane Katrina.
Fugate said his office hasnt decided whether an increase in FEMAs borrowing authority is needed to cover claims from flood insurance policyholders.
We are currently doing assessment, the FEMA chief said, noting the agency is using remote sensing technology to overlay images of flooded areas with data about the geographical distribution of flood-insurance policyholders.
Government-owned mortgage finance companies Fannie Mae and Freddie Mac said Tuesday that they have instructed loan servicers to give homeowners who sustained serious damage in Sandy up to a year to resume making mortgage payments.
Sandy is expected to drag on U.S. economic growth for the final three months of 2012. Some of the business losses will be gains as communities, businesses and homeowners rebuild and purchase supplies to do so.
But the losses at restaurants, movie theatres, bars and nightclubs and the like dont get made up, and this subtracts from growth. Some 8.2 million residents and businesses along the East Coast were without power Tuesday, adding to losses, and lost business is also reflected in places such as the famed Atlantic City boardwalk, which televised images Tuesday showed to be little more than driftwood in some places.