“There are still a number of wild cards about insurers’ costs from Sandy,” said Jochen Koerner, a member of the executive board in Germany and Austria at insurance broker Marsh & McLennan Cos. “It remains to be seen how long it takes for New York’s infrastructure to be up and running again and to what extent inland flooding is adding to the disaster’s bill.”

Insurers such as American International Group Inc. and the reinsurers who help them shoulder risks for clients may face insured losses of about $7 billion to $8 billion, led by costs in Pennsylvania, New Jersey and New York, according to Kinetic Analysis Corp., a hazard-research company in Silver Spring, Maryland. That compares to an estimate of $7 billion to $15 billion of insured losses from U.S. onshore properties that AIR Worldwide, a Boston-based risk-modeler, published yesterday.

There is the potential for “significant” business interruption and contingent business interruption losses related to the flooding and power outages, Fitch Ratings said in a report yesterday. Business-interruption coverage reimburses companies that suspend operations after property damage, while contingent policies offer protection if a supplier’s operations are hobbled.

“Sandy was an exceptional combination of a storm and cold front and business interruption claims will certainly be an important topic but also one that’s complex to analyze,” said Jan-Oliver Thofern, head of AonBenfield, Aon Corp.’s reinsurance brokerage, in Germany, Austria and Switzerland.

Disaster Impact

Sandy came ashore in southern New Jersey at 8 p.m. New York time on Oct. 29. The 900 mile-wide storm produced life- threatening surges in a region with 60 million residents and stopped the U.S. presidential race eight days before Election Day. It shut government offices, prevented U.S. stock markets from opening for two days and brought a surge of about 12 feet (3.7 meters) in Manhattan’s southern tip. Power was lost in large swaths of the island.

“Large natural disasters typically boost demand for insurance,” Marsh’s Koerner said. “Considering the benign year in terms of catastrophe claims and the abundance of reinsurer capital, Sandy won’t be a market changing event.”

Record Capital

Reinsurers have accumulated a record $480 billion of capital in the first half of the year, according to a report by Aon Benfield. Capital buffers have “continued to strengthen through the second quarter of 2012, moderating pricing pressures,” according to a report by Guy Carpenter & Co., the reinsurance brokerage of Marsh.

Munich Re, the world’s biggest reinsurer, said yesterday that it may take days or weeks to give a reliable estimate for storm claims. New York-based AIG said the company’s costs from Sandy will be more similar to Hurricane Irene than last year’s earthquake and tsunami in Japan, which cost insurers as much as $40 billion, according to Munich Re.

Irene, which wracked the same region 14 months ago, cost insurers about $5.5 billion, according to estimates by Munich Re. The Munich-based reinsurer reported a loss from Irene of 144 million euros ($187 million). Hannover Re, the world’s fourth- biggest reinsurer, said it incurred claims from Irene of about 26 million euros.

Contract Renewals

“The hurricane clearly will be visible in U.S. primary insurer’s combined ratios and also should impact reinsurance profitability somewhat,” Christian Muschick, an analyst at Silvia Quandt Research in Frankfurt, wrote in a note to clients today. Munich Re and Swiss Re AG, the world’s second-biggest reinsurer, may see “low triple-digit million” losses in euros and dollars respectively, he said.

Reinsurers are renegotiating terms and conditions of contracts due for renewal in January, typically the industry’s most important renewal date. Munich Re said last month it expects stable rates in January after last year’s record $105 billion of insured losses from natural disasters gave reinsurers leeway to push through price increases this year. Negotiating further increases may be more difficult as 2012 didn’t see disasters on the same scale and as reinsurers’ capital recovered.

The expected bill from Sandy for reinsurers isn’t enough to turn the “very benign” natural catastrophe year 2012 into an average year and “it clearly is a too small event to impact renewal negotiations tangibly,” Silvia Quandt’s Muschick wrote.