Important lessons for insurers and reinsurers have emerged in the wake of Hurricane Sandy, which accounted for almost half of all insured losses worldwide in 2012.The world’s second-largest reinsurer Swiss Re has reported on issues highlighted by the devastation caused by Hurricane Sandy when it slammed into the US East Coast last October with tropical storm-force winds stretching outwards 1,000 miles.Poor data quality regarding the likely impact of Sandy’s storm surge and the importance of policy deductibles have been brought to light in the wake of the hurricane, which accounted for $35 billion of insured losses.In its latest ‘Sigma’ report, Swiss Re estimated the total economic losses from natural catastrophes and man-made disasters last year was $186 billion, well down on the $403 billion losses of 2011.The total insured losses around the world last year were $77 billion, the third highest figure since 1970.Large-scale weather events that included Sandy and one of the worst droughts to hit the US corn belt since the 1930s, proved costly for North America.“Insured losses were highest in North America, where they reached almost $65 million. While insured catastrophe losses declined significantly in 2012 from the recent levels in 2011, they were still above the average of recent years,” Swiss Re reported.Hurricane Sandy developed in the Caribbean Sea south of Jamaica on October 22 and moved north.The storm then crossed Jamaica and Cuba and the eastern fringe of the Bahamas before making US landfall near Atlantic City, New Jersey on October 29.The hurricane had the largest reach of tropical storm-force winds ever recorded, spanning almost 1,000 miles.Sandy had widely spread but relatively low wind speeds, however it produced a remarkable storm surge that added significantly to overall insured losses.Examing what it terms “lessons learnt for the insurance industry”, Swiss Re said the storm surge had not adequately been assessed due to poor data quality.“Information on storm-surge exposure and insurance conditions is less developed than for wind exposure.This is currently considered a substantial source of uncertainty in the assessment of storm-surge risk,” it reported.The company warns that even without any rise in hurricane activity, storm surges like the one created by Sandy will become more frequent in the future due to rising sea levels around the world.The storm surge and associated flooding also badly hit New York City’s underground power infrastructure.“In the absence of effective mitigation measures against rising sea levels, the likelihood of prolonged power outages in the aftermath of such floods will increase,” the report stated.For the insurance industry the experience of Sandy also highlighted the important role of policy deductibles.“The question of applying or waiving hurricane deductibles was widely discussed in the media, in the insurance industry and among the general public.“The controversy was heightened by the classification of Hurricane Sandy as a ‘post-tropical cyclone’ just before landfall.“This again highlighted the need for precise policy wordings that minimise ambiguity and allow all parties to form reliable expectations about coverage, deductibles and the resulting future cash flows from an insurance contract,” noted the Sigma report.The impact of drought weather conditions in the US corn belt during 2012 resulted in estimated insured losses of $11 billion, according to Swiss Re.