Water damage from flooding related to hurricane Sandy in two northeastern Cities

Question

Water damage from flooding related to hurricane Sandy in two northeastern Cities resulted in damages estimated at $216 million. As a result of the claimant payouts, insurance companies raised homeowners' insurance rates by an average of $118 per year for each of the 320,000 households in the affected coastal cities. If a 20-year study period is considered, what was the rate of return on the $216 million paid by the insurance companies?

Explanation / Answer

$118*320,000=$37,760,000 if you consider 20 years study period then- $37,760,000*20=755,200,000 ==>Return=$539,200,000 Return per year=$26960000 i.e., rate of return=12.48% per year

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