Too Early to Calculate Reliable Loss Estimates for Hurricane Sandy
Newark, Calif. -
November 02, 2012 -
Hurricane Sandy's extensive and ongoing disruption will have important impacts on the ultimate economic and insured losses, reports Risk Management Solutions (RMS). The region's infrastructure has been significantly disrupted by Sandy's winds bringing down trees over a vast geographical area, and flooding along the coast of New Jersey and New York, particularly Manhattan and along the west side of the Hudson River.
"It is evident that Sandy's impacts are widespread and multiple, with mounting super-cat like elements," commented Claire Souch, vice president for Model Solutions at RMS. "The event is still live and several variables are yet to play out, consequently, it remains too early to provide a reliable estimate of the total insured losses."
"In particular the speed of restoration of power, and pumping out of floodwaters from towns and transport systems remain major unknowns. Our experience shows that these key variables will play a significant part in the ultimate loss."
RMS' event response teams, in California, Newark and London, have been working around the clock to assess the event. They report that Hurricane Sandy has impacted a very large area of the northeast United States with both wind-driven and surge-driven flooding impacts. Power outages have been extensive – Sandy has caused the most power outages of any hurricane in history impacting nearly 8.5 million homes and business across 15 states at the peak, and it's unclear how long it will take to resolve.
In addition, thousands of people remain under mandatory evacuation and ongoing flooding affecting many homes and businesses, particularly in southern Manhattan and along the west side of the Hudson River in New Jersey.
"Power reconnection rates have been shown during previous hurricanes to be an important driver of losses," continued Souch. "For example, after Hurricane Ike in 2008, over 2 million residents were left without power in Texas, with power outages lasting more than 10 days along the coast and in the Houston suburbs, with reconnection times rivaling that of Katrina, and significantly longer than all other hurricanes in the past decade. Infrastructure damage, e.g. substations, power lines etc. over a wide geographical area can take time to repair, depending on how quickly and how many repair teams can be mobilized."
Prolonged power outages can also interfere with property repairs, and can prolong flooding if water pumps are not operational. Extensive standing water has been shown in previous events to lead to a phenomenon known as "vulnerability deterioration", as the water seeps further into building's structures. Off-premises power losses may also contribute to insured losses. Contingent business interruption will also be aggravated if mandatory evacuations and no-go zones are maintained for an extended duration.
RMS continues to analyse its observations and data on wind speeds, surge levels, power reconnection rates, mandatory evacuations, flooding, status of transport networks and hubs, and other drivers of damage and loss. Simultaneously, the event response teams are tracking all possible causes of loss amplification and non-modeled losses, in order to build a complete and realistic view of the losses from Sandy.
RMS models and software help financial institutions and public agencies evaluate and manage catastrophe risks throughout the world, promoting resilient societies and a sustainable global economy.