Hurricane Sandy's cost to insurers will be fueled byhigher-than-estimated claims from clients who purchased protectionto guard against business interruption, Fitch Ratings said.

The storm left more than 8 million customers without power,shutting airports and New York's subway system, and disruptingbusiness at retail, manufacturing and energy firms.Business-interruption coverage reimburses companies that suspendoperations after property damage, while contingent BI policiesoffer protection if a supplier's operations are hobbled.

Insurers may incur $5 billion to $10 billion in costs from thestorm, according to catastrophe modeler Eqecat Inc. The totalincludes losses on auto, home and commercial coverage and followsrecord losses for the industry last year on disasters in Asia andthe U.S.

“Extensive BI and CBI losses were experienced by the insuranceindustry last year in both the Japanese earthquake and tsunami andThailand floods, as they accounted for a considerable portion ofcommercial and industrial losses,” the ratings firm said today in areport. “These events demonstrated the extent to which BI and CBIlosses have been underestimated in the modeling and underwriting ofrisks.”

American International Group Inc. has said the company's costsfrom Sandy will be more similar to Irene than the Japan disaster,which cost insurers as much as $40 billion, according to Munich Re.Irene caused about $4.3 billion in privately insured losses,according to the Insurance Information Institute, an industrygroup.

“It will be Irene, plus or minus something,” AIG Chief ExecutiveOfficer Robert Benmosche said at a conference yesterday in Chicago.“We don't see it as anywhere near the tsunami.”

AIG, the insurer that counts the U.S. as its largestshareholder, had $574 million in catastrophe costs at its Chartisproperty-casualty unit in last year's third quarter, led by Irene,the New York-based company said last year. The insurer said theearthquake and tsunami in Japan fueled about $1.7 billion incatastrophe costs in the first quarter of 2011.

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