SANDY | Official Costs Imply #5 Ranking among Hurricanes

Source: CityEconomist insertion of Sandy into the list, with $62.4 billion being the inflation-adjusted 2010 value of 24 states' costs. Original table from NOAA, National Weather Service, National Hurricane Center, Pielke et al. (R. A. Pielke, Jr., J. Gratz, C.W. Landsea, D. Collins, M. Saunders, and R. Musulin, 2008: "Normalized Hurricane Damages in the U.S.: 1900-2005." Natural Hazards Review, 9, 29-42, cited in Blake and Gibney, 2011). Pielke et al. adjust historical data for inflation to 2010, wealth per capita and population.

Where does $62.2 billion for NY and NJ put Sandy's rank among U.S. hurricanes? 

Governor  Christie of New Jersey late yesterday afternoon announced $29.4 billion as the cost of Sandy to New Jersey's 127 miles of coast. With Governor Cuomo's previous announcement of $32.8 billion, the total for these two hardest-hit states is $62.2 billion.

The NY-NJ estimate of $62.2 billion in 2010 equates to $66 billion in 2012 dollars according to the BLS cost-of-living converter. So for the total impact to be equal to $62.2 billion in 2010, the other 22 states affected by Sandy will need to come up with impact numbers that add up to $3.8 billion, which is a highly probable average of $170 million per state.

If the NY or NJ estimates rise, or other states have much higher costs that bring the total above $75.7 billion, Sandy could rank #4. But it was just a  tropical storm by the time it hit landfall in New Jersey, so Sandy is unlikely to get close to the Galveston Hurricane of 1915. 

Note that century-earlier estimates are generally based on physical damage only, whereas later economic impact numbers, after WWII, include impacts such as business-interruption costs because these became widely insured events. In addition, dollar-value rankings must be adjusted for inflation, as is done in the table above. There is no sense in using unadjusted dollar numbers that go back to 1900. The most costly U.S. hurricane ever was the 1926 Great Miami Hurricane, which cost $164.8 billion in 2010 dollars according to the National Hurricane Center.

Last year Hurricane Irene has been widely quoted as having had an economic impact of $15 billion and has been improperly ranked #5 highest in damage. Their numbers were not adjusted for inflation. Irene did not rank even in the top 10 after adjustment for inflation. (See my comments last year http://www.huffingtonpost.com/john-tepper-marlin/measuring-irenes-damage_b_940033.html).

PCS Says $11 Billion Sandy Claims So Far, Below Expectations

PCS reports that insurance claims for Sandy are only $11 billion. This is good news for casualty insurance companies and holders of catastrophe bonds (which don't pay off as much if a catastrophe happens). More broadly, the lower-than-expected number (Eqecat said it expected $20 billion in insured losses) could mean a number of things: - Huge losses are uninsured, which is quite possible because so much of the hit was taken by individual homeowners near water. Those properties are difficult and expensive to insure, which means many homeowners self-insure. - The Federal flood insurance program (FIMA, part of the FEMA system) may be getting many claims. - States and localities will be filling in to repair damage and take care of people made homeless and the costs will be filed with FEMA. - Homeowners may be slow to file claims. Or the Eqecat original estimate was too high. It was the basis for an economic-loss estimate of $50 billion that has been widely reported. NY Governor Andrew Cuomo has estimated $33 billion cost for New York State. NY City Council Speaker Christine Quinn used an estimate of $26 billion losses for New York City, after Gov. Cuomo released his estimate; her figure presumably is scaled to fit inside the statewide number. Still no estimates for New Jersey. Governor Chris Christie said he expected to release them by Wednesday, November 21. No sign yet in Googledom of these numbers. FEMA has been releasing data on the number of homes that have been damaged in any way.