Men stand near a destroyed home in Seagate, New York

Superstorm Sandy will likely hit the year-end earnings of major US insurance groups hard, but the impact will not have a significant impact on the industry's overall capital strength, according to a report issued by Moody's Investors Service.
With clean-up underway after one of the most severe costal storms in US history, analyst have been busy appraising the economic cost to the deadly storm which killed more than 60 people and left millions on the country's Eastern seaboard without power. Estimates for the insurance industry's exposure to storm-damage costs range from between $5bn and $15bn, according to research from New Jersey-based risk modelling firm EQECAT and its Boston-based rival AIR Worldwide.

"Assuming that ultimate losses are not dramatically beyond these ranges, the event will not jeopardize capital for major property and casualty insurers, although it will negatively affect fourth-quarter earnings, and may cause capital volatility for smaller regional insurers," wrote Moody's analyst Paul Bauer in the agency's weekly Credit Outlook bulletin.

Bauer expects homeowner's losses to make up the bulk of the industry's costs with the market's biggest coverage providers - Allstate, State Farm and Travellers and Liberty Mutual - bearing the lion's share of the exposure. "However, in this case, the relatively moderate wind speeds involved should limit structural damage to houses. Instead, damage to homes will likely be primarily from falling trees or minor damage to roofing and siding, rather than the destruction of complete buildings," he notes.

Allstate posted a better-than-expected net profit of $723m in for the three months ending in September Wednesday. CEO Tom Wilson said it was too early to estimate the storm's financial impact in the company's fourth quarter but he did not anticipate Sandy-related costs would be "meaningful in terms of our stability".

Liberty Mutual said Tuesday that its third-quarter revenue rose $511m from the same period last year to just under $9.3bn, taking nine-month revenues to just over $27.1bn

From a commercial insurance perspective, Bauer expects flooding to be a major issue for the main providers, which include Chubb and AIG as well as Liberty Mutual and Travellers.

"For Hurricane Irene in 2011, which also caused extensive flooding on the East Coast, commercial losses accounted for roughly one third of total insured losses, which tallied to $5.3 billion, according to Swiss Re Sigma" he wrote. "Commercial losses could make up a larger portion of total losses from Hurricane Sandy, given the widespread storm surge, extended period of rain, and concentration of damage in New York City and other urban areas."