Canadian financial service companies in the reinsurance business could take a financial hit from massive storm Sandy, the furious storm that has all but shut down the Eastern Seaboard.
The storm bearing down on New Jersey was to bring heavy rains, strong winds and high waves in parts of Ontario, Quebec and the Maritimes.
Preliminary estimates are that damage will range between $10 billion and $20 billion. That could top last year's hurricane Irene, which cost $15.8 billion.
If so, Sandy would be among the 10 most costly hurricanes in U.S. history. But it would still be far below the worst - hurricane Katrina, which cost $108 billion and caused 1,200 deaths in 2005.
Peter Morici, professor at the University of Maryland pegs the economic impact in the U.S. even higher - at about $35 billion to $45 billion. "It seems likely that Sandy will impose greater destruction of property, and add to that the loss of about two days commercial activity, spread over a week across 25 per cent of the economy," he said.
Canadian companies that provide reinsurance to property and catastrophe insurance companies, such as Bank of Montreal, Great-West Lifeco and Manulife Financial, could see a drag on earnings in the fourth quarter if damage is significant, RBC analyst Andre-Philippe Hardy said.
Reinsurance companies write backup insurance for primary insurers so that the insurance industry can cover catastrophic claims, such as from natural disasters. The impact on the companies depend on many factors, such as how much of the damage was insured by them and how much they charged for coverage.
If the storm did cause damage in Canada, Intact Financial Corp. the largest provider of property and casualty insurance in Canada, would also have exposure.
Canadian Hurricane Centre spokesman Bob Robichaud said the western Maritimes will see the most rain, with between 50 and 100 millimetres predicted from today into Wednesday.
