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Sandy fallout unlikely to be felt here

ALAN WOOD AND AGENCIES
Last updated 08:26 05/11/2012

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The impact of Superstorm Sandy that hit the eastern seaboard of the United States last week is unlikely to affect earthquake-hit Canterbury and the rest of New Zealand.

That is the view of the Insurance Council of New Zealand and others in the insurance industry here.

Key reinsurers in Britain will be hit to some extent by the damaging events on the eastern seaboard of the US.

Those same reinsurers hold the strings in terms of new insurance conditions arising in New Zealand after the Canterbury quakes of 2010 and 2011.

That includes higher premiums being set, and higher excesses paid by the insured for future events.

Council chief executive Chris Ryan said he thought it was highly unlikely the impact of the US damage on insurers and reinsurers would impact on New Zealand.

Hurricanes and storm events were factored into different parts of the reinsurance market.

"They factor in those storms which are a fairly regular occurrence on the northeast of the US," Ryan said.

Preliminary estimates of damage range between US$10 billion and US$20 billion.

That could top last year's Hurricane Irene, which cost US$15.8b, and the total economic impact from the slowdown from damage could be much higher, according to an Associated Press report.

Because the storm had hit a highly populated region, with "one of the highest concentrations of wealth in the world", the damage was likely to run into the billions, analysts at Morgan Stanley said.

Another New Zealand industry participant, who did not want to be named, said it was likely the European reinsurers would be less exposed to the damage in the US.

That was because a greater proportion of the insured damage would be carried by the individual insurers themselves.

"[The damage] was spread across a wide range of businesses, and therefore subsequently a lesser proportion was [covered by] the reinsurers.

" I know in the Canterbury scenario something like 80-90 per cent of the costs are borne by reinsurers, a lower percentage if that's what eventuates in the eastern seaboard, mitigates the reinsurers then putting up their charges still further."

Peter MacLeod, of London Market Services who represented Lloyd's insurance members in New Zealand, said he doubted there would be a significant impact from Hurricane Sandy despite insurance cover in the US making up 40 per cent of the Lloyd's market.

"It's an impact on them but they can take it. That's what the insurance industry is all about."

The US was a big market, with premiums paid across the whole of that country, enabling those areas hit on the east "to take it on the chin", said MacLeod, who has worked as a loss adjustor in the Caribbean.

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- © Fairfax NZ News

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