Insurers - sizing up Sandy The storm has passed and people along the north east coast of the US are slowly starting to assess the damage caused by Hurricane Sandy. One of the first calls will be to the insurers. Traditional wisdom has it that now would be a good time to buy in to the insurance sector, as big losses are swiftly followed by higher premiums and, eventually, higher profits. According to Credit Suisse, US reinsurers outperformed US non-financials in the year after Hurricane Andrew in 1992, the Northridge Earthquake in 1994 and Hurricane Katrina in 2005. This time is different, though. It is early days, but risk modellers are estimating the insured loss to be between $7bn and $20bn, well ahead of the $4-5bn suffered after Hurricane Irene last year. That will not worry the reinsurers too much - their coverage only tends to start once the loss has passed $10bn so their portion of the total will be relatively low. The primary insurers are more exposed, so the likes of State Farm, Allstate and Travelers, which have big market shares in the affected areas, will be the ones to watch. Much will depend on how much damage was caused by wind (covered by insurers) and how much by floods (covered by the government). Prices have already been rising, driven by global catastrophe losses and poor weather in the US in 2011. US property catastrophe insurance prices are up 7 per cent this year according to Guy Carpenter. On top of that, the sector as a whole is well-capitalised thanks to rising earnings (until Sandy, 2012 had been a relatively benign year for weather losses) and a more conservative investment attitude across the sector. Sandy-related losses will dent earnings this year - Morgan Stanley has cut fourth-quarter EPS estimates for the property and casualty sector by 26 per cent - but are not likely to damage materially the industry's capital position. And the more capital there is chasing business, the less scope there is for premiums to rise, and share prices to follow them.