While the impending Hurricane Sandy may have kept the financial markets (and the New York City subways) closed today, insurers are gearing up for what’s likely to be one of their busiest weeks of their year. As we reported earlier, some $87 billion worth of property – or 284,000 U.S. homes — in the path of Hurricane Sandy are at major risk of flood and storm damage; in the New York metro area more than 119,000 homes are at severe risk.
While federal flood insurance will cover the damage in some instances, national insurers will have to shoulder some of the burden, which is expected to exceed the $4.3 billion in losses from last year’s Hurricane Irene. Janney Montgomery analyst Larry Greenberg told the Wall Street Journal losses could total up to $6 billion, though other news outlets are estimating up to $10 billion.
Despite added insurance costs and last year’s hurricane, property values in Lower Manhattan and other low-lying areas of New York such as Brooklyn’s Red Hook or Williamsburg have not noticeably dropped, Jonathan Miller of appraisal firm Miller Samuel told The Real Deal.
“I haven’t observed any patterns over the past year and I am skeptical we will observe such patterns anytime soon,” he said, “especially in a period of tight inventory. The fact that a borrower needs flood insurance for these properties (if they are in a FEMA zone A) already reminds them of the risk at time of purchase.”
It will likely be days or weeks before the full impact of Sandy is known. In the meantime, insurers are crossing their fingers that the storm will lose momentum once it gains landfall. – Katherine Clarke