A Hidden Safety Net, Made Visible By The Storm
The Fairway supermarket in Red Hook, Brooklyn is the sort of place New Yorkers, accustomed to cramped spaces, talk about with amazement. It's an actual, full-size supermarket, right at the edge of New York Harbor.
It's a beautiful setting, but one that was diastrous last week, when Sandy came through.
"There were five feet of water throughout the store," Bill Sanford, the president of the company told me. "Everything was submerged."
They had to throw out dumpsters worth of food. Chicken, fish, vegetables.
Fairway is a local business with about a dozen stores, not some big national chain. The flooding in Red Hook really seems like the worst possible scenario — a terrible, expensive mess. But it turns out, there is a hidden backup system that has already kicked into action.
"We have business-interruption insurance," Sanford said. "It basically pays what your business would have been earning. It pays for your wages for your employees."
That's not all. Fairway also property and casualty insurance. Which covers all the stuff — equipment, rotten food, destroyed refrigerators, whatever.
This is one reason why, when a rich country gets hit by a natural disaster, it barely shows up as a blip on the national economy. There are all these backup systems in place.
Even the insurance companies have a backup system. It's called re-insurance.
"We are the insurance company to the insurance companies," says Eric Smith, CEO of Swiss Re Americas. The "Re" is for reinsurance.
As bad as Sandy has been, Smith says it's been a pretty average year for disasters around the world. Swiss Re alone has $200 to $300 billion in reserves.
"As you look around the world around you, there's really nothing you can see that is not covered by reinsurance," Smith says. "A person's life, every building, every business, everything people own."
Insurance obviously doesn't cover everything. But by one estimate, it could pay for a third of the total damages from the storm. After that insurance and reinsurance will go back to being invisible, hopefully for a long while.
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