Superstorm Sandy likely will have limited credit impact on the insurance and reinsurance sector, but it highlighted some areas of unexpected risks for the industry, according to a report issued Monday by Standard & Poor's Corp.

S&P said in the report that many insurers and reinsurers still are estimating their losses from the storm, which caused devastation along the East Coast of the United States. The rating agency said the complicated nature of business interruption, infrastructure and flood claims because of factors such as nonstandard policy wordings and slow claims reporting meant that many insurers and reinsurers had experienced difficulties in assessing their exposure to the storm losses.

The rating agency said that while losses likely would reduce insurer and reinsurer earnings for 2012, they likely would not impair the industry's capital.

According to the report, losses from the superstorm likely would have to reach about $50 billion to cause any material erosion — between 5% and 10% — of reinsurers' capital base.

Primary insurers whose earnings are affected and whose capital is depleted by at least 5% to 10% could be the subject of rating actions, S&P noted.

But while S&P does not expect to take major ratings actions as a result of the storm, it said losses from the event had highlighted potential changes to previously held beliefs about the nature of catastrophe claims.

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For example, it said, auto losses arising from flood damage caused by the storm likely will be larger than previously assumed. And the basis risk for nontraditional reinsurance products such as industry loss warranties may have been underestimated, S&P said.

The rating agency said that while official loss figures for natural catastrophes typically are calculated using Property Claim Services methodology, this may exclude losses incurred on policies underwritten directly by non-U.S. insurers. The fact that some internationally insured losses may be excluded could mean that some ILWs do not reimburse beneficiaries, the report noted.

Meanwhile, Bermuda-based collateralized insurance investment vehicle CATCo Reinsurance Fund Ltd. said it had included a retrocessional reinsurance loss reserve provision in its net asset value calculation as at Nov. 30, 2012.

CATCo said the retrocessional reserve was based on an estimated industry loss of $20 billion from Superstorm Sandy. At that level, CATCo said, its gross expected returns for 2012 would drop by 13.2%.