No, my friend said. He readily admits insured damage could be $20 to $25 billion, which is currently the high end of the estimates. But of that, the big commercial insurance companies (Allstate, Travelers, Chubb) will be responsible for perhaps the first $13-$15 billion or so, and after that the remainder will be picked up by reinsurance companies. Some of the larger reinsurers (Swiss R, Munich Re) will take hits but nothing that will do them in.
(Read more: Here's Another Sandy Victim: November Jobs Growth)
The best part (from the insurance company perspective) is...premiums will be going up. A lot. Already this year, premiums are up for business lines. And because so many people were underinsured (a fact they discovered to their chagrin) there will be demand for much more insurance, and of course, that will cost them.
Stocks not waiting for firm loss estimates. It's true the big guys have not reported their losses yet, so a large number of investors are sitting tight. But the estimates appear manageable. Progressive has estimated auto losses at $55 million, a serious but not disastrous loss.
And the stocks are beginning to move. Allstate, for example, went from $41 to $39 in the wake of Sandy, but it's been up the last two sessions and looks ready to break out to $40.
(Read more: Who Gets Hurt the Most If US Goes Off the 'Fiscal Cliff')
Fourth quarter earnings are certainly at risk, but not the prospects for future rate hikes. Allstate, for example, may lose $1 billion to $2 billion, but they made $700 million in the last quarter. A wipeout for the quarter is manageable long-term.
Finally, given the enormous damage, why are insured claims estimated to be only $20-$25 billion? One of the main sources of potentially high payouts is business interruption (BI) insurance. However, most BI policies require some kind of physical damage to the building before BI insurance can kick in. What's the difference? A lot of businesses were shut down, for example, because the power went out, but the building wasn't damaged.
That kind of interruption is not typically covered under BI insurance. There will likely be some litigation around how much policyholders can recover under BI policies!
—By CNBC's Bob Pisani
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