Barack barracks for insurers

Insurers got a rare nod from US president Barack Obama today, when he urged them to show “heart and spirit” when handling claims coming from Superstorm Sandy.

Insurers are on the hook for as much as $25bn (£15.7bn) following the storm, according to some estimates. The total insured loss is uncertain, however, because most insurers have not publicised their expected losses.

QBE is one of the few (re)insurers to announce its expected losses of $350m to $450m (£220.5m to £283.7m), and rating agency AM Best put QBE’s credit and debt ratings on negative outlook as a result.

The damages

Sandy was an unusual US storm, as most of the damage it caused came from storm surges rather than the more typical high winds.

A preliminary damage survey conducted by reinsurance broker Willis Re found that damage from storm surge and flooding caused by Sandy was “widespread and extensive”, but wind damage caused only minor damage.

If this survey is anything to go by, much of the claims will come from flood damage to buildings, damage to cars and boats, and physical damage to properties.

Much of the cost is likely to be picked up by the US National Flood Program, which will pick up losses not specifically covered by policies, as household and commercial flood protection is not a standard insurance cover in the USA.

Insurers are exposed to potentially heavy business interruption losses coming from the evacuation and shutdown of large parts of New York and the surrounding areas.