At Monday morning local time, the centre of Hurricane Sandy was located approximately 280 miles east of Cape Hatteras, North Carolina and 425 miles south-southeast of New York City. Sand was reported as a weak Category 1 hurricane with maximum sustained winds of 75 mph and a minimum central pressure of 950 mb.

RMS reports say the current forecast has Sandy making landfall in the US along the southern/central New Jersey coastline in around 24 hours time, early on Tuesday (UTC), October 30 as a Category 1 extra-tropical cyclone, having transitioned just prior to landfall.

Sandy is still a very large storm with hurricane and tropical storm force winds extending outwards up to 175 miles and 520 miles from the centre respectively. Surge levels could reach 6 to 11 feet in the Long Island Sound, Raritan Bay and the New York Harbour, should these coincide with high tide. Extra tropical transition is not expected to have much effect on the broad-reaching impact of Sandy.

Dubbed “Frankenstorm” by various media sources because it is the sum of several weather systems, Hurricane Sandy, could potentially impact the catastrophe bond market, according to Adam Beatty, managing director of Willis Capital Markets & Advisory. But it is far too early to tell for sure. “There are a lot of cat bonds that have exposure to the North East coast,” explained Beatty. “But whether this event is big enough to trigger those bonds is not at all certain at this stage.”

As it approaches landfall along the Eastern Seaboard of the United States, Hurricane Sandy is expected to cause a huge storm surge. Storm surges happen when the sea is whipped up by strong winds and high tides. “Once the sea water comes inland it’s hard to stop,” says Beatty. Low lying areas are particularly at risk. New York has reportedly closed its public transport system ahead of the storm and issued a mandatory evacuation for low lying areas.

Flooding as a result of the storm surge could be the biggest cause of damage, leading to (re)insurance losses and widespread disruption. Many of the homeowners claims will be dealt with by the NFIP (National Flood Insurance Program), but flooding of commercial areas could significantly impact the insurance industry. The high winds are also a significant risk to property, particularly with such a large slow moving storm.

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