Hurricane Sandy

Doug DixonSenior Claims Manager, Swiss Re

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What made Sandy a "Superstorm"

Designated Tropical Depression 18 on October 22.

Tracked north through the Caribbean, landfall in Jamaica

Rapidly intensified to a strong category 2 hurricane– Landfall in Cuba - 110 mph

winds– Paralleled the southeast US,

traveling northeast, maintaining hurricane intensity

Final turn out to sea blocked by a high pressure system

Sandy turned northwest, merged with an extratropical cyclone and made landfall during king tide on the NJ coast on October 29– central pressure 946 mb– maximum wind speeds 85 mph– brought 10–14 feet of storm surge

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From tropical depression to Nor'easterSandy – a brief history

Photo source: NASA

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Sandy

Width: 900 milesWind speed: max 167 km/hrDates: October 22-31Death toll: 253 worldwideMissing: 15 worldwideSurge height: max 4.5mPopulation effected: 19.9 million

Hurricane Sandy's path

Northeast has experienced devastating hurricanes (1821 Norfolk-Long Island, 1938 Long Island Express, Gloria) and Nor'easters (1962 Ash Wednesday, 1991 "Perfect Storm," December 1992) in the past

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Sandy: unprecedented or unusual?

Source: NOAA/CSC

One single event is not evidence of a large scale climate change.

Impossible to determine how many storms were missed pre-satellite era.7

Sandy and climate change

Source: Unisys

1933 2012

Sea surface temperatures off the east coast of the U.S. were 5 degrees warmer than normal

The sea level at Battery Park has risen around 19 inches since the 1850s

With another 1–2 feet of anthropogenic sea level rise projected to occur by 2050, another storm less intense than Sandy will be able to generate higher storm tides by mid-century

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Sandy and climate change

Source: PMSL

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Impact and damages

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Storm surge & flood damage

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Wind damage

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Power outages

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Business interruption

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Overview of the insurance marketplace

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Market loss estimatesAgency Comment Range (USD)

RMS

Confusion over wind vs. water losses, as well as BI losses, will cause further uncertainty as to a final-loss figure. The fact that Sandy is the second significant storm to strike the Northeast in as many years—and that hurricane deductibles didn’t apply for either—will guide future conversations over pricing and terms and conditions. (as of 11/26/12)

~$20bn-25bn

EQECAT Estimated insured losses of USD 10bn-20bn with total economic damage USD 30bn - 50bn (as of 11/01/12) ~$10bn-20bn

AIR WorldwideAIR estimated that insured losses from Sandy will be between USD 16 and USD 22 billion. (as of 11/26/12) ~$16bn-22bn

KCCEstimated that insured wind losses due to Superstorm Sandy will be $12 billion, in part due to a large number of small claims. (as of 11/14/12)

~$12bn

LloydsLloyd’s said the range of its net, pretax claim estimate was consistent with expected industry losses of between $20 billion and $25 billion. (as of 12/19/12)

~$20bn-25bn

Willis

The estimated Sandy economic losses of up to USD 50bn, high insurance penetration in the region and uncertainty over business interruption means the insured burden could top USD 30bn. (as of 11/12/12)

> $30bn

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Comparison to past events

$46.6

$22.9 $20.0

$13.1 $11.7 $8.8 $8.3

$6.8 $6.4 $5.4

0.0

10.0

20.0

30.0

40.0

50.0

Katrina Andrew Sandy Ike Wilma Charley Ivan Hugo Rita Frances

Loss

es (I

n U

SD b

illio

ns)

Ten Largest Hurricanes by Insured Property Loss(1)

Source: ISO PCS(1) figures adjusted for inflation through 2011 by ISO using the GDP implicit price deflator(2) Figures are not trended/developed. Q3 and Q4 2012 are estimates from Business Development

9%

20%

71%

Final Estimate

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Sandy claim count estimates:Nearly as many claims as Katrina

Commercial Auto Personal

350K

157K

1.24M

1.75M

Katrina

Source: PCS Catastrophe Bulletins

Sandy

12%

16%

72%

May 23rd Estimate

1.58M 258K

1.1M

193K

$21,068,024,400 

$2,167,900,000 

$17,864,195,000 

Final Estimate

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$41.1 bn

Katrina

Source: PCS Catastrophe Bulletins

Sandy

$8,927,000,000

$2,716,000,000

$7,107,000,000

May 23rd Estimate

$18.8 bn

Sandy loss estimates: Commercial loss estimate grows

Commercial Auto Personal

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Sandy claim estimates: Average losses smaller than Katrina

Sandy average claims payment as of 5/23/13

Source: PCS Catastrophe Bulletins

$10,527 

$6,295 

$46,254 

$6,194 

$14,395 

$134,534 

Auto

Personal

Commercial

Katrina final average claims payment

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Claims Issues

Wind v. water – Is storm surge covered or excluded– Anti-concurrent causation clauses– Fact intensive

Business Interruption– Damages caused by covered peril?– Was there "direct" physical loss or

damage to the property?– What is the period of restoration?

damage?

Civil Authority, Ingress/Egress, Loss of Power

– Coverage varies depending on policy wording—but access must be completely denied

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Contract wording — what is covered?

Regulatory authorities impact claim handling requirements, and possibly contract terms

Hurricane deductibles on HO Policies New York Insurance Regulation 64 (applies to 10 county

areas around NYC)• Reduced time to commence claim investigation from 15

to 6 days• Allowed repairs to be commenced before insurer inspects

property• Temporary easing of public adjuster licensing

requirements• Required report cards for 24 insurers --

http://www.nyinsure.ny.gov/nys-insurer-report-cards.html

Mandatory mediation programs Consideration of anti-concurrent causation clause programs Flood maps have proven to be inadequate and need

revising

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Regulatory riskStorm

surge/Flood Wind Damage

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What will the future bring?

Increased activity by public adjusters?

Increased costs due to demand surge?

Fraud: insureds and vendors?

BI claims smaller than anticipated due to service based industries?

99% of claims will be settled quickly and amicably, but….

Others? Time will tell…

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http://i.telegraph.co.uk/multimedia/archive/02381/hurricane‐sandy_2381667b.jpg

Thank you