How Will We Pay for Superstorm Sandy?

While the full extent of the harm caused by superstorm Sandy is still unknown, it?s clear that the region sustained significant damage and disruption, particularly along the coastal areas of New York, New Jersey, and Connecticut. As we describe earlier in this series, the economic costs associated with natural disasters are generally thought to arise from the damage and destruction of physical assets and the loss of economic activity. These costs can be substantial, running into the tens of billions, and impose significant stress on the affected communities. In this post, we assess who will ultimately pay the economic costs imposed by the storm. Based on data from recent hurricane events, it is likely that the federal government and private insurance companies will more than cover the aggregate costs. In the short run, though, there may be strains on state and local governments as well as on individuals and businesses as they await reimbursement.