Financial Costs of Sandy Being Measured in Tens of Billions
Superstorm fulfills warnings long made by climate change experts
From being called 'Frankenstorm' as it made its way up the east coast, to a 'superstorm' as it moved over highly populated areas of the northeast coast on Monday night into Tuesday—including devastating impacts in New York City, Atlantic City, New Jersy and elsewhere—the damage caused by Hurricane Sandy, as agencies get their first look, is being measured in the tens of billions of dollars and could be the most expensive storm ever to hit this area of the United States.
"With about one-fifth of the U.S. affected directly by Hurricane Sandy," reports ABC News Tuesday morning, "tragic human loss reached 69 in the Caribbean, and U.S. economic losses could range around $35 billion to $45 billion."
As climate scientists and global warming campaigners have long warned, the financial impacts of extreme weather events—in addition to the enormous human and ecological toll of climate change—will ultimately manifest in ways the US public and elected officials would find hard to ignore.
“This is a wake-up call for America to start aggressively investing in low carbon sources of energy," said Dr. Laurie Johnson, chief economist in the climate and clean air program at the Natural Resources Defense Council, following release of a recent report that suggested the US is vastly under-estimating the true costs of its carbon-intensive energy economy.
"There is no doubt that climate has changed," said climate scientist at Stanford University Dr. Christopher Fields earlier this year. "There is also no doubt that a changing climate changes the risks of extremes, including extremes that can lead to disaster."
"Understanding the role of climate change in the risk of extremes is one of the most active areas of climate science," he said. "As a result of rapid progress over the last few years, it is now feasible to quantify the way that climate change alters the risk of certain events or series of events."
The Royal Gazette online reports:
Hurricane Sandy, now the largest hurricane ever recorded in the Atlantic, has the potential to become one of the most expensive as well — causing some of the largest losses the global insurance industry has faced this year.
The catastrophe modelling firm Eqecat expects insured losses to range between $5 and $10 billion and economic losses of $10 billion to $20 billion. The estimates includes damages to residential property, commercial property, energy production and the interruption of business, according to Tom Larsen, senior vice president of Eqecat.
At the low end of Eqecat’s estimates, Hurricane Sandy would become one of the ten costliest hurricanes in US history, according to the Insurance Information Institute.
Mohammad Khan, insurance partner at consultancy PwC, said the damage "could easily run into the tens of billions of dollars and if so, this will have a significant impact on insurance and reinsurance premiums globally".
"Post hurricane flooding could cause more severe damage than Katrina. The coastline is poorly prepared for storms and surges of this size. With so many of the key businesses based in New York, the cost from the interruption to business activities will be a key component of the potential loss that insurers could be paying out - it could be the highest the industry has ever seen," Dom Del Re, head of catastrophe management, PwC added.
For many parts of the East Coast, the biggest fear from Sandy isn’t necessarily rain, but wind. FEMA is estimating that wind damage to homes and businesses could cause $2 billion to $3 billion in economic losses alone. And that could cause power outages that could last for days or weeks that could then crimp economy activity.
Because the storm is shutting down some of the nation’s largest metropolitan areas — namely New York City and Washington — as well as their public-transportation systems, one analyst at Moody’s Analytics predicts that losses will be $10 billion a day, according to CNBC.
It’s also possible that oil prices could rise — and therefore gas prices — if any refineries along the East Coast are damaged or are shut down for a prolonged period. About 7% of U.S. oil capacity is located in the region, but any increase in gas prices is likely to be felt primarily in the Northeast rather than across the U.S.
Bloomberg news has early morning video discussing financial costs: