U.S. Insurers Slump as Trading Resumes After Sandy

U.S. property insurers declined on the first trading day in New York after Atlantic superstorm Sandy lashed the U.S. and a risk modeling firm said the damage could cost the industry as much as $15 billion.

Allstate Corp. (ALL), the largest publicly traded U.S. home insurer, dropped 1.3 percent to $39.62 at 9:44 a.m. in New York. American International Group Inc. (AIG) slipped 0.9 percent and Travelers Cos. dropped 1.3 percent.

The storm will probably cost insurers $7 billion to $15 billion, AIR Worldwide said yesterday, an estimate that accounts for physical damage to property, business-interruption coverage and additional expenses for displaced residential policyholders. The higher figure would make Sandy the third costliest U.S. hurricane, after Katrina, which caused more than $40 billion in losses in 2005, and 1992’s Hurricane Andrew.

“Sandy’s diameter was nearly twice the size of other massive hurricanes including Katrina,” said Tim Doggett, Boston-based AIR Worldwide’s principal scientist, in a statement yesterday. The size “allowed the storm to interact with an approaching disturbance in the jet stream that resulted in severe weather across a wide swath of the eastern U.S.”

The costs may lower book value, a measure of assets minus liabilities, by 2 percent for the property-casualty industry, with a reduction of as much as 5 percent at companies with a high concentration of risk in the hardest-hit areas, according to Keith Walsh, an analyst at Citigroup Inc.

Declines today provide an opportunity to buy shares of Northbrook, Illinois-based Allstate, AIG and RenaissanceRe Holdings Ltd., the Bermuda-based insurer, said Josh Stirling, an analyst at Sanford C. Bernstein & Co. All three companies are scheduled to announce third-quarter results this week.

The insurers will probably beat analysts’ expectations “and this provides an immediate catalyst likely to help reverse negative momentum in the stocks,” Stirling said.

RenaissanceRe fell 1 percent.

To contact the reporter on this story: Noah Buhayar in New York at nbuhayar@bloomberg.net;

To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net

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Oct. 30 (Bloomberg) -- Record flooding knocked out power to more than 8 million people in the U.S. Northeast, shutting down public transportation and paralyzing Manhattan’s financial district as remnants of superstorm Sandy churned west. This slideshow illustrates the storm's impact from coastal New Jersey to the shores of Lake Michigan. (Source: Bloomberg)