Claims by contractors and building owners under builders' risk policies could climb in the weeks following Hurricane Sandy, but the pricing for coverage of windstorms already had been adjusted in the last year, making rate increases less likely, say insurance brokers.
For some brokers, a week after the storm is too soon to tell if builders' risk claims will roll in from the complex New York City- area market, with its numerous renovations and new construction projects. "We just don't have any visibility now relative to builders' risk," says Matt Walsh, managing director of the construction services group for broker AON Risk Solutions. Other brokers agreed.
However, other brokers said claims were likely. Catherine McGrath, vice president of broker Alliant Construction Services, says some clients with projects in the "zone of danger" from wind or surge damage contacted Alliant before Sandy hit. "Really, they were almost reporting it blind so that all the wheels were in motion to put people in touch" in the event of a claim, says McGrath.
Peter Jones, Alliant's senior vice president for construction services, says that clients who secure jobsites and prepare well "may have complicated claims," but those clients are doing everything possible to keep projects moving forward instead of just waiting for the carrier to get them a check.
Adjustment After Irene
The final insured losses from Hurricane Sandy are taking more time to calculate because of the extensive and ongoing disruptions involving the restoration of power and pumping out floodwaters.
Risk Management Solutions (RMS), which models catastrophes for insurers, warned it will need more time for a final loss estimate.
Pricing of renewals of builders' risk policies aren't likely to be driven higher, however. Some brokers suggest that property-damage models prepared by RMS were updated last year following Tropical Storm Irene to reflect more potential for wind damage and flooding in the Northeast. Insurers already were charging more based on that model.
The model, RMS-11, pushed the anticipated damage of hurricanes farther up the U.S. coast. Based on the damage inflicted by Hurricane Sandy, says one broker, "It will be interesting to see if RMS built their [new] model correctly."
