Insurance rates for commercial property risks are likely to start rising again next year due to Superstorm Sandy, according to insurance experts.

This is because catastrophes have been the main driver of property insurance prices.

“My expectation is this [Sandy] will stabilize the market in which rate levels, while still positive, have been decreasing in magnitude in recent months," said Mark Bernacki, head of global property for Beazley Group. “With Sandy’s impact, by year end we will be in a positive single digit rating environment, similar to what we were experiencing earlier in the year.”

He said that the global catastrophes of 2011 had begun to push up property rates slightly over the first half of this year, but by the third quarter of 2012 some of these increases had started to dissipate.

This year had been relatively quiet in terms of catastrophes.

Then came Sandy, causing billions in dollars of damage with the number still rising. Coming near the end of 2012, Sandy will affect year-end renewals and then have consequences into next year, Bernacki said.

Although storm estimates have come in between $10 billion and $20 billion, Mario Vitale, CEO of Aspen Insurance in New York, says he personally thinks it will more likely be on the higher end of that number.

Of those insured losses, business interruption claims will be the most difficult to determine and to settle, and could push the financial impact on the property insurance market even higher.

“While it’s not a capital depletion event, it’s more of an earnings interruption,” he says. “It's material enough, and coming at the end of the year, significant enough to affect the January 1st renewals for sure. And I believe that you will see immense pressure from the market in response to those earnings.”

Insurers have begun to implement the California-based RMS U.S. Model Version 11.0 that shook up the way they assess their hurricane risk when it was unveiled nearly two years ago. Bernacki says that increased underwriting discipline along with the new RMS new model, which was predicted to raise  property rates, kept property pricing from softening despite an overabundance of capacity.

Now with a huge event such as Sandy, Bernacki does not expect downward pressure on rates to continue.

“Property tends to be more event-specific or now in the new world, kind of driven by changes to the model itself,” he says.

But perhaps more important than any rate changes is how insurers in the admitted property market will now view CAT risks in the Mid-Atlantic and Northeastern states because of Hurricane Irene last year and Sandy this year.

“The simple fact of two tropical storms/hurricanes affecting the New York metro area in two consecutive wind seasons has confirmed the area’s vulnerability,” Bernacki says. “I believe the net result will be increased wind rate loading for the area and more business flowing into the surplus lines market from the standard market arena.”

Bernacki said he doesn’t view Sandy as the catalyst to push the property segment into a full-fledged hard market but does anticipate a disciplined market in terms of price and risk selection.

This will hopefully discourage admitted insurers from writing these risks and return them to the surplus lines market where, he says, they are better suited.

“Even low strength storms can have a significant impact on the market, due to lower caliber construction standards, compared to other wind prone areas, and the large concentration of exposure,” says Bernacki.