Sandy Wreaks Havoc, Economic Impact Not Yet Clear
By the time trading starts back up in New York, traders should have had time to assess how severe the damage could be from Hurricane Sandy and the stormy weather that hit the east coast this week.
The high tides from a full moon and the collision of Sandy with another storm made for a powerful surge that sent waves into lower Manhattan, close to the New York Stock Exchange, and other heavily populated areas around New York city and along the coastline early Monday evening. Power was shut down for blocks and in the Wall Street area, where subways were threatened by salt water rolling into lower Manhattan.
Stock trading was to be closed for a second day Tuesday. Bond trading was conducted in a shortened session Monday, but is also closed Tuesday. Energy and other commodities will continue to trade electronically.
Sandy came ashore in southern New Jersey Monday evening, where abnormally high tides flooded the coastline, swamping Atlantic City and other Jersey shore beach communities. By the time it made landfall, the storm was stripped of its hurricane status.
"It's a challenge because all events are unique. Sandy is a little more unique than most. What we looked at with Sandy is an enormous area with large winds," said Tom Larsen, senior vice president of EQECAT, a catastrophe risk modeling firm used by insurance companies and others. EQECAT's forecast for economic losses from Hurricane Sandy is $10-20 billion, and insured damage would be about $5 to $10 billion. Insured damage does not include what would be covered by federal flood insurance.
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"This type of event is really difficult," said Larsen, even before New York began to flood. "…the subways are a big concern." Larsen said the storm is on par with Hurricane Irene, or a bit more severe. The economic impact estimate includes the cost of business interruption, and also the impact to public buildings, roads and bridges. Insurance companies with exposure include Chubb, Allstate, Hartford Financial and Travelers .
Corelogic estimates that 284,000 residential properties, valued at $88 billion, were at risk from the storms in mid-Atlantic states.
Morgan Stanley analysts estimate that the initial forecasts for Hurricane Sandy insured losses of $5 to 10 billion should not result in big profit hits or price increases for reinsurers. They said the loss level should be similar to Hurricane Irene, at about $7 billion. Irene hit the east coast in 2011. Hurricane Katrina's insured losses totaled an estimated $62 billion.