The latest re-survey of hurricane Sandy insurance industry loss estimates has now been completed and published by Property Claim Services (PCS). The loss estimate for Sandy has not changed after this re-survey, it remains at $18.75 billion, and PCS told us that it is going to perform another re-survey in 60 days time to ensure that the loss estimate is accurate and reliable.
We spoke with Gary Kerney, Assistant Vice President at PCS, who told us that the re-survey found some minor changes in some U.S. states with respect to claims count and average paid, but PCS didn’t feel that the changes were significant enough to warrant changing the estimate from March. So the estimate delivered to PCS clients is the same in terms of numbers and split of claims and losses as it was after the March survey.
The fact that another re-survey is going to be undertaken is a little unusual, PCS usually closes down an event after the industry loss estimate remains the same for two consecutive surveys, but in the case of Sandy feel that the complexity of the storm warrants another re-survey which will take place in 60 days, so sometime in late July. PCS’ first estimate released in November was for $11 billion of losses, the first re-survey in January took that to $18.75 billion where it stayed for the March resurvey.
Gary Kerney told us that PCS wants to undertake another re-survey for a number of reasons. Hurricane Sandy is the third largest hurricane in PCS’ records and was a particularly complex storm. Because of this complexity, PCS want to ensure that the final loss estimate that it publishes is reasonable, reliable and truly reflects what the insurance industry is going to pay.
Kerney also told us that by opting for another re-survey, PCS will have time to fully consider some commercial losses, such as transportation system losses and large commercial properties primarily in downtown Manhattan, to unravel any questions surrounding the size of these losses and any business interruption.
It is well-known that there have been some discussions over cause of damage, ie. wind versus flood, and how that relates to losses on some commercial policies. Given the extent of the damage from hurricane Sandy, and the fact that it is just seven months since the storm struck, it seems sensible for PCS to make a final sweep in 60 days time to ensure it has accounted for all of the losses.
Kerney said that PCS want some more time to run down these issues and to ensure that its final loss estimate accurately reflects the impact that hurricane Sandy had on the insurance industry.
It’s hard to see how the estimate could jump significantly now, but it is important to remember that it only needs to jump by $1.25 billion to hit the all important $20 billion at which point some reinsurance or industry loss warranty (ILW) contracts could come into play.
We will update you when we hear the next update from PCS in approximately 60 days time.
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