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As The Hurricane Damage Tally Begins, Here Is Who Pays

Tyler Durden's picture


While it is too early to estimate the ultimate losses wreaked by Hurricane Sandy in the last 24 hours, we thought it useful to start gauging relative exposures and which companies are the most exposed. As it stands, Hurricane Katrina remains #1 of all US Catastrophes as the most-costly at $46.6bn (2011-equivalents) with 9/11 second at $38.5bn; with the worst MTA disaster in its history and the relative wealth in the areas affected, one can't help but feel like Sandy could be up there. The P&C insurance industry will bear the brunt of personal and corporate losses (as well as federal relief we pre-suppose) and is better capitalized than in the past but as JPM notes, initial estimates of losses tend to be revised upwards. The most exposed insurer is State Farm with an 11.4% share of all potential liability lines in the states impacted, followed by Allstate and Travelers. We finally note that when the P&C industry experiences losses of this magnitude, it typically leads to increased pricing for an extended period of time (as they rebuild capital bases).

The Top 10 Most Costly Catastrophes


The Most Exposed P&C Insurers


and Hurricane Irene Re-Insurer Losses


Source: JPMorgan and Goldman Sachs


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Tue, 10/30/2012 - 08:57 | 2930948 CPL
CPL's picture

Were the adjusters out there en masse last night?


Only people I seen were reporters.

Tue, 10/30/2012 - 09:29 | 2931050 fuu
fuu's picture

They were all hanging out with the flash mob at Times Square.

Tue, 10/30/2012 - 09:30 | 2931056 eclectic syncretist
eclectic syncretist's picture

So when the insurers jack rates up on the entire eastern seaboard that will provide a huge boost to the economy, right?

Tue, 10/30/2012 - 10:07 | 2931197 Vince Clortho
Vince Clortho's picture

from the Central Planner's Handbook: " ... Never let a natural disaster go to waste."

It may not boost the economy, but it most definitely Will boost the net worth of a certain select group of people.


Tue, 10/30/2012 - 10:40 | 2931328 larz
larz's picture

ask tok1 - from the broken windo fallacy responses, seems to know all about it

Tue, 10/30/2012 - 09:48 | 2931110 Stoploss
Stoploss's picture

Good luck getting coastal insurance after this.

The central planners better hurry up and get into the insurance biz, cause anything within 50 miles of the coast will be uninsured for future storm damage.

They like to leave out those little details until after the fanfare blows over, then, in six months or less, we will hear about how nobody in NY can get property insurance with storm coverage. Been there and done that.

Welcome to the club, New York.

Tue, 10/30/2012 - 09:58 | 2931145 agNau
agNau's picture

Wonder...what assets will require selling to payout claims?.....
Yo Bennie,.....remember those wet dreams you've been having about really stepping up the printing?......

Tue, 10/30/2012 - 09:00 | 2930953 firstdivision
firstdivision's picture

Turn those machines back on!

Tue, 10/30/2012 - 11:53 | 2931584 Diet Coke and F...
Diet Coke and Floozies's picture


Tue, 10/30/2012 - 09:05 | 2930964 malikai
malikai's picture

I'm not so familiar with the way insurers operate. Does anyone in the business know what insurers tend to hedge with? I.e. What will they be selling to meet the claims?

Tue, 10/30/2012 - 09:07 | 2930975 scatterbrains
scatterbrains's picture

they'll be selling you higher premiums to pay for this mess.

Tue, 10/30/2012 - 09:19 | 2931007 ptoemmes
ptoemmes's picture

Already doing/done that in Florida.  Getting expensive to live here though I can only imagine the cost of living in the Northeast before and now after.

Tue, 10/30/2012 - 09:16 | 2931009 malikai
malikai's picture

Not me, I'm not a buyer. But I'm sure everyone in the region will get to pay the higher premiums.

Tue, 10/30/2012 - 09:28 | 2931044 GeezerGeek
GeezerGeek's picture

What this article needed was a way to use a webcam on the reader's computer to render an image of the reader onto the web page. Somehow or other, the costs will ultimately be borne by we, the people. Since the article did not contain such a capability, and since not everyone has a webcam on, I suggest that readers - at least US readers - simply go look in a mirror and say "Somehow, I'm going to pay."

Tue, 10/30/2012 - 13:44 | 2931971 Dburn
Dburn's picture

+1 for new iAPP idea . In the interim,  How about photographs of the possesions that readers will have to sell in order to meet their new financial obligations, with special prizes for the biggest tear jerkers and of course special worthless points awards good for redemption in Zynga Games for those who show good  taste in lighting and perspective. 

Tue, 10/30/2012 - 09:17 | 2931010 flacon
flacon's picture

Reinsurance - if an insurer can't pay they get insurance from another insurance company. 

Tue, 10/30/2012 - 09:28 | 2931047 JPM Hater001
JPM Hater001's picture

Bingo...More below on that.

Tue, 10/30/2012 - 09:24 | 2931033 CPL
CPL's picture

Higher premiums for Everyone!



Tue, 10/30/2012 - 09:10 | 2930988 moonstears
moonstears's picture

CDSs? Thus JPM, MS and GS, too in the mix?

Tue, 10/30/2012 - 09:19 | 2931011 malikai
malikai's picture

That's what I want to know. Last I heard most insurers were into government and corporate debt. I'm just wondering if that's still how it goes.

Also, who insures the NY subway system?

Tue, 10/30/2012 - 09:21 | 2931016 DeadFred
DeadFred's picture

Great question especially if someone has an idea on the timing. Liquidated in a short time period this would more than counter the QE effect just when the markets are vulnerable.

Tue, 10/30/2012 - 09:34 | 2931070 malikai
malikai's picture

If it does have a material impact on rates, this could get interesting.

Somehow I'm figuring Benocide will step in to "save" the day.

Tue, 10/30/2012 - 10:10 | 2931209 Vince Clortho
Vince Clortho's picture

I have to believe Bernankster in front of a Computer keyboard can pay for this whole thing in 5 minutes.

Tue, 10/30/2012 - 10:18 | 2931246 malikai
malikai's picture

He will 'order' everyone else on Earth holding dollar debt to pay for it. And we will.

Tue, 10/30/2012 - 09:26 | 2931042 JPM Hater001
JPM Hater001's picture

I can only speak to Life/health insurance but the principles are relative.

While the underlying risk pool is in bonds mostly it is the companies choice to hedge.  Manulife chose not to hedge a pension and got called on the carpet-

They did the same thing with their long term care product at John Hancock (yes, a Canadian company owns John Hancock...)

What is the vastly under-reported story here is what the reserves have been returning over time.  From my experience ZIRP is destroying insurance reserves and to exacerbate the global economic woes this is most likely going to kick in the insurance on insurance (called Reinsurance) and guess who owns big parts of that? 

  1. Munich Re – Germany ($31.4 billion Gross Written Premiums)
  2. Swiss Re – Switzerland ($30.3 billion)
  3. Berkshire Hathaway / General Re – USA (n.a.)
  4. Hannover Re – Germany ($12 billion)
  5. SCOR – France ($6.9 billion)
  6. Reinsurance Group of America – USA ($5.7 billion)

I see some real problems coming to a German or Swiss country near you soon.

Tue, 10/30/2012 - 09:36 | 2931058 malikai
malikai's picture

Exactly, so they're 'hedged' in zero or soon-to-be zero yielding paper. So this time around they might be able to flip that crap back to the FED. But when they repurchase, they'll absolutely be buying zero or negative yielding paper(inflation adjusted).

Doesn't make sense really. And won't this shitty arrangement naturally compound the effect on premiums? I mean, someone will have to do the math on yields and their ability to meet claims in the future.

Tue, 10/30/2012 - 10:01 | 2931163 kridkrid
kridkrid's picture

Thanks for this.  Focking math, focking everything up again.  Things seem normal as we move gradually up the exponential function curve... so much so, we don't even come to realize all of the things tied to that curve.  This interconnected world of financial interdependency is running on fumes.  It doesn't really matter, at this point, what the piece is that will lead to the violent collapse... but it's just as likely to be this event as anything else.

Tue, 10/30/2012 - 13:31 | 2931924 Dburn
Dburn's picture

I'm not so familiar with the way insurers operate. Does anyone in the business know what insurers tend to hedge with? I.e. What will they be selling to meet the claims?


What makes you think they will pay out on any claims? 

Tue, 10/30/2012 - 09:05 | 2930968 scatterbrains
scatterbrains's picture

I thought the policy holders pay once the ins. regulators allow these companies  to jack their rates up to cover the cost.

Tue, 10/30/2012 - 09:05 | 2930969 Ace Ventura
Ace Ventura's picture

Great. Everyone one of us State Farm customers in unaffected areas get ready to grab our ankles...rate hikes a-comin'.


Tue, 10/30/2012 - 09:08 | 2930971 lolmao500
lolmao500's picture

They say the damage will be between $5-20 billion...

Upcoming catastrophe : Cascadia going off... probably gonna top Katrina by a lot.

Other possible catastrophes : Nuclear meltdown, big dam breaking, big earthquake on the San Andreas fault line, the New Madrid fault line (15 nuclear power plants near the fault), fault line under South Carolina, The Ramapo Fault which is under NYC... Louisiana sinkhole going kaboom...

Lots of potential doom... the Mayans were riiiiiiiiiight... riiiiiiight?

Tue, 10/30/2012 - 09:31 | 2931059 JPM Hater001
JPM Hater001's picture

It's the Yellowstone Caldera that keeps me up at night...

Scientists say it's about 100000 years overdue...

Tue, 10/30/2012 - 09:07 | 2930972 SheepDog-One
SheepDog-One's picture

Should be no problem at all even if it is $80 billion in damages, thats just 1 month of QEternity at $85B's/month.....just hit Bernank up for a check.

Tue, 10/30/2012 - 10:02 | 2931167 Village Smithy
Village Smithy's picture

Thanks for slapping me in the face with reality SD1. I was thinking that this may cause a spike in bond yields as the insurers had to sell their holdings to make payouts. As you point out though even if damages are $100 B it's a drop in the bucket of debt that Bernanke has created.

Tue, 10/30/2012 - 09:10 | 2930974 buzzsaw99
buzzsaw99's picture

Good. State Farm will sell some their worthless holdings right into the fed ghouls.


btw: State Farm doesn't have shareholders so suck it Blankfein et al.

Tue, 10/30/2012 - 09:07 | 2930979 Translator
Translator's picture

Obama knew about 9-11 and Hurricane Sandy and did nothing........

Tue, 10/30/2012 - 09:13 | 2930998 moonstears
moonstears's picture

lol translator...Just back from travelling my time machine... "We inherited Bush and his HAARP, and must work to clean up his mess" BH Obama. 10/31/12

Tue, 10/30/2012 - 09:32 | 2931062 GeezerGeek
GeezerGeek's picture

He knew about the hurricane. In fact, he used HAARP to direct it near NYC and cause the flooding in the financial zone. He needed the NYSE to shut down until after the election, lest the market have a huge sell-off and further diminish his tenuous grip on reelection.

Tue, 10/30/2012 - 10:35 | 2931308 kridkrid
kridkrid's picture

Let's assume for a second that what you claim to be possible is possible.  And I'm open minded.  Do you really think that  group of people who could set this event in motion would do so to get a president reelected?  Wouldn't it be far easier to control the political apparatus by controlling both parties and both candidates?  Dont' waste good conspiracy theory on bad party politics non-stories.

Tue, 10/30/2012 - 13:28 | 2931914 Dburn
Dburn's picture

+ 1 for Snark that was taken seriously by your detractors.  


Tue, 10/30/2012 - 09:08 | 2930981 dolph9
dolph9's picture

Actually, you and I are paying.

Because they will go to the government for a bailout, and spread out the increased premiums throughout the country.  And the resulting debt will be monetized resulting in even more inflation.

So pay up, bitchez. 

Tue, 10/30/2012 - 09:12 | 2930996 buzzsaw99
buzzsaw99's picture

We already pay those maggots hundreds of billions per year in guaranteed profits on treasuries, mbs, equities, you name it.

Tue, 10/30/2012 - 09:09 | 2930985 redeals
redeals's picture

Some homeowners may find that flooding is not covered in many standard policies.

Tue, 10/30/2012 - 09:10 | 2930991 Dr. Engali
Dr. Engali's picture

I hope Berkshire's uncle Warren takes a bath (calling Becky quick) with losses. It would be nice to see the kleptocrat's empire crumble before he exits this life.

Tue, 10/30/2012 - 09:13 | 2930999 buzzsaw99
buzzsaw99's picture

Thank you for the warm fuzzy this a.m..

Tue, 10/30/2012 - 09:14 | 2931002 lower98th
lower98th's picture

I wonder who actually has hurricane insurance, or does calling it sub-tropical bail out the NE?  Or flood insurance.  As homeowner's doesn't cover floods or wind driven water. 

Tue, 10/30/2012 - 09:23 | 2931029 mayavision2012
mayavision2012's picture

Table I describes 9/11 event as "fire" and "EXPLOSION" at WTC towers and Pentagon.  Interesting and revealing.

Tue, 10/30/2012 - 09:35 | 2931075 GeezerGeek
GeezerGeek's picture

Just like the shootings at Ft. Hood are considered a workplace incident. Or maybe the causes are ignored and the effects are specified.

Tue, 10/30/2012 - 09:29 | 2931053 Flakmeister
Flakmeister's picture

Pretty soon weather related insurance will be prohibitively expensive or non-existent...

The re-insurance guys have figured out AGW for a while and since they don;t profit it from it, you get the truth...

Tue, 10/30/2012 - 09:32 | 2931063 CEOoftheSOFA
CEOoftheSOFA's picture

I've paid about $10,000 in premiums in the last 21 years without making a claim.  Now my tree fell on my car.  But the car is only worth about $1,000 with the kids in it and I have $1000 deductable!

Tue, 10/30/2012 - 09:42 | 2931093 GeezerGeek
GeezerGeek's picture

$10K in 21 years? Where do you live? Being a mile from the Ft. Lauderdale beaches, I've paid nearly that much in the last 3 years, and that doesn't even cover windstorm damage (a separate policy in my area, should I choose to get that coverage) or flood insurance (which I stopped paying long ago when I paid off my mortgage). You pay your money and you take your chances.

P.S. Put a higher value on your kids. Some day they'll end up supporting you, the way things are going.

Tue, 10/30/2012 - 11:42 | 2931541 Ballin D
Ballin D's picture

The way things are going, nobody's kids are going to be able to support them.  If you cant support yourself, how do you think the people growing up in this mess are going to be able to support themselves and save enough to support their parents?

Tue, 10/30/2012 - 13:25 | 2931904 Dburn
Dburn's picture

Was your insurance automatically cancelled like mine was since we had the unmitigated audacity to actaully make a claim? I am curious, what was the value of the car without the kids and did the kids become a permenant part of the tree induced  radical alteration  of the interior and exterior of your car .

Tue, 10/30/2012 - 09:37 | 2931080 Hubbs
Hubbs's picture

First Wall Street screws the country, and has to be resurrected finacially


Now the insurance bill to rescue Wall Street physically (from storm damage.)


And as  State Farm insured, now I will have to pay higher premiums, even thjough I live down here in Misissippi, having moved from coatal NC.


In the meantime, the Sytate Farm agent has been sitting flat on his fat ass for 2 weeks (even before Sandy hit) with no clerical work on the transfer of my auto and umbrella coverage.  Shows you how useless these FIRE industries really are.  And don't forget the politicians and the lawyers.( The latter are the maggots from which the politican flies are born.)


The parasitic burden the working, productive, soon to be exhausted, starved and extinct middle class is carrying is unbearable.

Tue, 10/30/2012 - 10:02 | 2931168 Shizzmoney
Shizzmoney's picture

Can't wait to see the insurers try to fight these claims.

Unlike the poor folk in New Orleans (literally), the New Yorkers have a weapon.....they're called, "really good Jewish lawyers".

Tue, 10/30/2012 - 11:34 | 2931506 flacorps
flacorps's picture

The insurers will have some too. They'll both bribe the judges, who will then be obliged to actually rule on the merits. Oy vey, like the goyim do it!

Tue, 10/30/2012 - 10:06 | 2931192 ShrNfr
ShrNfr's picture

In the long haul, it is a zero sum game. The insurance companies will liquidate assets to pay claims. The claims will be used to replace lost properties. However, the capital used to buy the assets from the insurance companies will not be used someplace else.

Tue, 10/30/2012 - 10:30 | 2931219 Monedas
Monedas's picture

Where's the prosperity from all the broken windows, Keynesian Filth ?    Break a window .... feed a glazier for a day !    Burn the whole house down .... help all the trades !     Arson is wealth generation !  Hurricanes are a gift from Heaven ? World Wars even better ?  Oh, the prosperity !

Tue, 10/30/2012 - 10:13 | 2931226 sbenard
sbenard's picture

In his weekly commentary yesterday, Dr. John Hussman calculated that Sandy will cost 1.5% GDP -- to the downside. He also mentioned that in both the 2001 and 2008 recessions, we never saw two consecutive quarters of negative GDP, which is often cited as the measure of a recession. In both the 2001 and 2008 recessions, positive GDP figures were ultimately revised downward by -2.8% -- EACH. Thus, even the positive figure for GDP we received last week is likely to be revised into negative territory. Sandy just puts the icing on the recession cake!

But stocks are positive! Go figure!

Here's his analysis:

Tue, 10/30/2012 - 10:22 | 2931257 Monedas
Monedas's picture

The Bloom is off the Burg !     Sandy was an illegal storm .... it was "Super Sized" and contained more than 16 ounces !  

Tue, 10/30/2012 - 10:39 | 2931278 Monedas
Monedas's picture

Tweedle Dee .... and Bloomberg Dumb !                   What are the insurance companies to do to win the praise of the Socialist filth .... burn all the policies then liquidate their assets amongst all the claimants equally ?  How did North Korea handle claims when that ammo dump near the China border blew up ?  I'm sorry .... that was one of the happier days of my life !

Tue, 10/30/2012 - 11:10 | 2931366 Monedas
Monedas's picture

A bullet is just wind driven lead !        Self inflicted Socialist damage dwarfs all natural disaster damage !

Tue, 10/30/2012 - 10:54 | 2931375 killallthefiat
killallthefiat's picture

More brilliance from the Oracle of Omaha.  Thank goodness he divested himself of metals and got into "producing assets".

Tue, 10/30/2012 - 11:03 | 2931400 radicall
radicall's picture

Will insurers sell stocks or fixed income to raise the money?

Tue, 10/30/2012 - 13:19 | 2931842 Dburn
Dburn's picture


Will insurers sell stocks or fixed income to raise the money?



Neither. Insurers have taken an older Capital Retention Program that was primarily used by Health Insurers to a whole new level. They just don't pay claims.  The cornerstone of this Capital retention policy is to automatically say no to all claims and then wait to see who comes back with attorneys at their side. After a long and and expensive battle, the claim is paid in a manner somewhat analogous to a syphilitic dribble.


The two main components of the Capital Retention Program are 


1. ZIRP - Where insurers no longer earn any money at all on the "float " they get from capital reserves from policy payments.


2. Greed - This is more or less a dependency component in that ZIRP contributes mightily to it. No Billionaires are made in C-Suites of companies that cheerfully pay claims.


It should also be noted that fierce lobbying on the part of the Private Sector P & C insurance companies virtually eliminated flood insurance over the years from any Policy purchased unless the purchaser was a influential member of congress. Flood Insurance has been shifted to the Public Sector as in Taxpayers.


The ZH crowd is familiar with this strategy as is  also utilized by TBTF banks like Bank of America who shifted all their derivative exposure to the FDIC insured subsidiaries of the BHC. That way when the inevitable happens , derivative bets going bad, they simply take customer money on deposit to pay them off while the FDIC makes good to the customers. Most would say "Say, what's wrong with that , The FDIC is funded by the Banks Insurance premiums. Yes and those premiums, along with $4.10 won't get you a small tasters cup of Latte from Starbucks.  The FDIC has been perennially in the red since the manufactured bank crisis started. Part of this was the sheer breadth of the crisis but strangely enough the main reason why Taxpayers will get stuck with this bill also is that Congress listened carefully to Bank Lobbyists in 1996 who claimed the 50 odd billion or so in the FDIC accounts was more than enough and agreed that the "poor banks" shouldn't have to pay any more insurance premiums. It was only 10 years later, in 2006, that Congress most grudgingly agreed that perhaps it was wise to have those payments resume over the screaming shouts of agony of Bank lobbyists.

Interestingly enough and perhaps just coincidentally the "wave" election occurred the same year where many members of congress lost their seats. 

edit: Another effective component of the P&C insurers is to automatically cancel the insurance policy of anyone who dares to make a claim and then put their name with a big black blotch of death on your personal Insurance Credit report. Which effectively Black Mails you from all P & C insurance except the exceptionally high risk policies sold by the same companies at many multiples of the original policy. For those that say " I can't afford that" and have a mortgage on the property, the banks automatically purchase a policy for you and add it on to your mortgage payments. The rest of you who "did everything right" and paid off your mortgage , are fucked which is pretty much the new status quo in the US.

It can only be left to one's imagination if the Bank will purchase a credit default swap on your mortgage after the new insurance payments raise your payments to nose bleed levels  and if the Insurance company who aided the bank will be satisfied with the increased premiums , or will demand a portion of the Credit Default pay out -outs when one goes tits up on the mortgage.

USA USA USA bringing new innovation into the financial services industry.  


Tue, 10/30/2012 - 12:32 | 2931707 SmittyinLA
SmittyinLA's picture

Most of the damages are flood related, nearly all homeowner policies exclude flood  coverage which is usually provided by the insolvent NFIP (national flood insurance program). 

The taxpayers will eat the losses, FEMA will grow a little bit more for the next disaster and our debt load will increase. 

Checks will go out to those with insurance, and checks will go out to those without insurance, bills will go out to the taxpayer.

All the vampire squid that live on the beach will put in claims for new stuff compliments of the state subsidized NFIP.(some for their 3rd and 4th flood claims)

Tue, 10/30/2012 - 13:37 | 2931944 Dburn
Dburn's picture

Credit Default Swap premiums on MBS focused on eastern seaboard properties should be going vertical right now since no one is going to  get their claims paid hence no one will move back into their destroyed residence/business whihc means strategic walk-aways should be the order of the day or for poor people and other deadbeats they will just go two toes up on their mortgages. 

The Vampire Squids strike again. Watch Goldman Sachs collect 67B for it's 2.1 Billion dollar building that wasn't damaged but could have been. 


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