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A Hidden Safety Net, Made Visible By The Storm

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A Hidden Safety Net, Made Visible By The Storm


A Hidden Safety Net, Made Visible By The Storm

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A storm like Sandy can make you grateful for the basics: electricity, gasoline, buses and trains.

NPR's David Kestenbaum, of our Planet Money Team, has this story about one more thing people are not taking for granted after the storm.

DAVID KESTENBAUM, BYLINE: The Fairway Supermarket in Red Hook, Brooklyn is the sort of place New Yorkers, accustomed to cramped spaces, talk about with amazement because it's an actual, full-size supermarket - like you can get lost in it. Unfortunately it is also right on the water.

I biked over and found a man at the gate.

You guys not open yet?

UNIDENTIFIED MAN: No, we're not open. We won't be open for a while.

KESTENBAUM: How bad is it inside?

UNIDENTIFIED MAN: It's pretty bad but we're not going to comment on anything right now.

KESTENBAUM: I wanted to know more about just how bad. Fairway is a local business, has about a dozen stores. So I called the president of the company, Bill Sanford, from my cell phone on the street. He said it was bad.

BILL SANFORD: There were five feet of water throughout the store, literally everything from our refrigerated cases to the checkout counters, the machines and the computers, everything submerged.

KESTENBAUM: He said they had to throw out dumpsters worth of food - chicken, fish, vegetables. You could still smell it all in the parking lot.

This 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.

SANFORD: Well, we have business interruption insurance. It basically pays what your business would have been earning. So it pays for your wages for your employees.

KESTENBAUM: As if the cash registers are still ringing.

SANFORD: Yes, in most senses.

KESTENBAUM: That's not all. Fairway also has property and casualty insurance, which covers...

SANFORD: All the equipment, all the physical plants, all the inventory - anything that was lost in the store.

KESTENBAUM: All the inventory - all the food, all the refrigerators, the cash registers?

SANFORD: Correct.

KESTENBAUM: And 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 systems in place - all these Plan Bs. For instance, if you ask the insurance companies what happens if they run out of money, they have a Plan B. It's this guy, Eric Smith, CEO of Swiss Re Americas. The Re is for reinsurance.

ERIC SMITH: We are the insurance company to the insurance company.

KESTENBAUM: Eric Smith says as bad as this storm has been, it's been a pretty average year for disasters if you look at things globally. Swiss Re alone - and there are other reinsurance companies - Swiss Re alone has 200 to $300 billion in reserves. Most people don't think about reinsurance but he says it's all around us.

SMITH: As you look around the world around you, there's really nothing that you can see that isn't probably covered by a form of reinsurance. An individual's life, every building, every business, everything that people own - if you look up into space at the satellites, you know, space launches and so forth - there's reinsurance that comes into play.

KESTENBAUM: Insurance obviously does not 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.

David Kestenbaum, NPR News.

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