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| Superstorm Sandy could cost $45bn in damage and lost production | Superstorm Sandy could cost $45bn in damage and lost production |
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| Superstorm Sandy could cost up to $45bn in damage and lost production after it swept across America's east coast, wreaking far more havoc than hurricane Irene last year, economists say. | Superstorm Sandy could cost up to $45bn in damage and lost production after it swept across America's east coast, wreaking far more havoc than hurricane Irene last year, economists say. |
| While it will take weeks to count the cost, Sandy is likely to be among the most costly disasters in history and could slow down the American economy's momentum in the fourth quarter. | While it will take weeks to count the cost, Sandy is likely to be among the most costly disasters in history and could slow down the American economy's momentum in the fourth quarter. |
| Wall Street was closed for two days and few US companies released results, with knock-on effects on share trading in London. The devastation is a big worry for stocks and share prices are set to take a hit if trade resumes on Wall Street on Wednesday as planned. Insurance shares in London including Hiscox, Amlin and Catlin, which slipped on Monday, regained some ground. | Wall Street was closed for two days and few US companies released results, with knock-on effects on share trading in London. The devastation is a big worry for stocks and share prices are set to take a hit if trade resumes on Wall Street on Wednesday as planned. Insurance shares in London including Hiscox, Amlin and Catlin, which slipped on Monday, regained some ground. |
| Sandy left behind a trail of damage – homes underwater, trees toppled and power lines downed – while New York's subway system was flooded, the worst disaster in its 108-year history. | Sandy left behind a trail of damage – homes underwater, trees toppled and power lines downed – while New York's subway system was flooded, the worst disaster in its 108-year history. |
| The US economists Gregory Daco and Nigel Gault at IHS Global Insight estimate Sandy will cause $10bn of insured losses to infrastructure and twice as much in terms of total damages. Irene left behind it a $15bn path of destruction across 13 states last year. But the researchers warned that the much bigger Sandy was likely to end up causing more flooding damage. | The US economists Gregory Daco and Nigel Gault at IHS Global Insight estimate Sandy will cause $10bn of insured losses to infrastructure and twice as much in terms of total damages. Irene left behind it a $15bn path of destruction across 13 states last year. But the researchers warned that the much bigger Sandy was likely to end up causing more flooding damage. |
| The superstorm has also forced 70% of the east coast's oil refineries to shut down, which will put up gasoline prices in coming days. Its commercial impact is likely to be worse than that of Irene, which hit on a Sunday, while Sandy hit the east coast on a Monday. Economic losses caused by business shutdowns and a slump in consumption could easily outweigh infrastructure damage. | The superstorm has also forced 70% of the east coast's oil refineries to shut down, which will put up gasoline prices in coming days. Its commercial impact is likely to be worse than that of Irene, which hit on a Sunday, while Sandy hit the east coast on a Monday. Economic losses caused by business shutdowns and a slump in consumption could easily outweigh infrastructure damage. |
| Mohammad Khan, insurance partner at PricewaterhouseCoopers, estimated total economic losses from Sandy at $45bn, taking the 1938 New England storm as a proxy, and warned of higher insurance premiums. "Will hurricane Sandy impact insurance premiums? If losses are in the range of $10-$20bn, there may be a short knock-on effect. A loss double that size, however, is more likely to raise premiums globally, as was the case with other events such as hurricane Andrew, 9/11 and hurricane Katrina." | Mohammad Khan, insurance partner at PricewaterhouseCoopers, estimated total economic losses from Sandy at $45bn, taking the 1938 New England storm as a proxy, and warned of higher insurance premiums. "Will hurricane Sandy impact insurance premiums? If losses are in the range of $10-$20bn, there may be a short knock-on effect. A loss double that size, however, is more likely to raise premiums globally, as was the case with other events such as hurricane Andrew, 9/11 and hurricane Katrina." |
| The $45bn estimate pales in comparison with hurricane Katrina, which caused $120bn of damage in 2005, while the cost of last year's earthquake in Japan was more than $200bn. | The $45bn estimate pales in comparison with hurricane Katrina, which caused $120bn of damage in 2005, while the cost of last year's earthquake in Japan was more than $200bn. |
| "The effect on growth for the fourth quarter will not be catastrophic but might still be noticeable, especially in an economy with little momentum anyway," the IHS economists said. "Suppose that the affected regions lose just 25% of their overall output for two days that is not recoverable later. That would knock about $25bn annualised ($6bn actual) off GDP, and could take as much as 0.6 percentage points off the annualised fourth-quarter real GDP growth rate." | "The effect on growth for the fourth quarter will not be catastrophic but might still be noticeable, especially in an economy with little momentum anyway," the IHS economists said. "Suppose that the affected regions lose just 25% of their overall output for two days that is not recoverable later. That would knock about $25bn annualised ($6bn actual) off GDP, and could take as much as 0.6 percentage points off the annualised fourth-quarter real GDP growth rate." |
| The economics consultancy Capital Economics reckons Sandy's economic impact is likely to be small in the long run because the effects of the infrastructure damage and power outages will be offset to some extent by the massive clean-up that will follow. Paul Ashworth, the chief US economist, said the impact could be quite large initially because the 12 affected states account for nearly a quarter of national GDP, with the New York area alone accounting for a tenth. | The economics consultancy Capital Economics reckons Sandy's economic impact is likely to be small in the long run because the effects of the infrastructure damage and power outages will be offset to some extent by the massive clean-up that will follow. Paul Ashworth, the chief US economist, said the impact could be quite large initially because the 12 affected states account for nearly a quarter of national GDP, with the New York area alone accounting for a tenth. |
| If all output was lost for two days, the economic loss would be about 0.7% for the fourth quarter – but this would be largely offset by the resulting clean-up. The overall impact on GDP growth could even be positive, he said, as households and businesses sweep up the damage. | If all output was lost for two days, the economic loss would be about 0.7% for the fourth quarter – but this would be largely offset by the resulting clean-up. The overall impact on GDP growth could even be positive, he said, as households and businesses sweep up the damage. |
| The credit ratings agency Fitch said losses related to Sandy would be largely borne by primary insurers such as State Farm, Allstate, Liberty Mutual Group and Travelers. Christopher Grimes, senior director of insurance, said losses were likely to be similar to hurricane Irene, which cost insurers $4-5bn. | The credit ratings agency Fitch said losses related to Sandy would be largely borne by primary insurers such as State Farm, Allstate, Liberty Mutual Group and Travelers. Christopher Grimes, senior director of insurance, said losses were likely to be similar to hurricane Irene, which cost insurers $4-5bn. |
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