Im­pact of Har­vey and Irma on the mar­ket

UK in­sur­ers may have es­caped a big fi­nan­cial hit from re­cent US hur­ri­cane ac­tiv­ity

Shares - - DISCLAIMER -

Hur­ri­cane sea­son is upon us and it has been a roller­coaster for the share prices of listed Lloyd’s of Lon­don in­sur­ers. Af­ter Hur­ri­cane Har­vey hit at the end of Au­gust, the costs for the likes of Bea­z­ley (BEZ), Lan­cashire (LRE) and His­cox (HSX) are es­ti­mated at around £100m each.

Bea­z­ley and Lan­cashire suf­fered the most, with their shares drop­ping 12% and 11% re­spec­tively.

Since mak­ing land­fall, the lat­est scourge of Hur­ri­cane Irma has been down­graded to a trop­i­cal storm, im­ply­ing less dam­age. The re­vised cost of Irma has been slashed to as low as $20bn for the in­sur­ance in­dus­try, a long way off the $150bn touted for some time.

This seems re­flected in the mar­ket re­ac­tion to the in­sur­ance firms once Irma had be­gun to pass through Florida.

For in­stance, Lan­cashire gained 10%, Bea­z­ley was up 4.3% and His­cox ticked up 3.3% on Mon­day (11 Sep).

The idea that th­ese events could ‘har­den’ the in­sur­ance mar­ket and hike pre­mi­ums in the fu­ture is soundly re­jected by Pan­mure Gor­don an­a­lyst Bar­rie Cornes. He tells Shares ‘there’s so much cap­i­tal in the world in­sur­ance sys­tem it would take about three or four Ir­mas to take enough money out of the sys­tem to al­low rates to go up’.

We note that UK-listed Catco Rein­sur­ance Op­por­tu­ni­ties Fund (CAT) has seen its share price fall 16% to $1.12 since 23 Au­gust and its shares didn’t en­joy the re­prieve rally seen among the Lloyd’s in­sur­ers. It has a port­fo­lio of in­vest­ments linked to catas­tro­phe rein­sur­ance con­tracts.

CLEAR­ING UP THE MESS

The hur­ri­canes may con­versely help those in the con­struc­tion busi­ness. Equip­ment rental spe­cial­ist Ashtead (AHT) could do well from the hur­ri­cane sea­son. It makes the ma­jor­ity of its money in the US through its Sun­belt divi­sion and is par­tic­u­larly strong in Florida and Texas.

When the re­build­ing starts, firms might hire sub­stan­tial ma­chin­ery from Sun­belt. Ashtead’s chief ex­ec­u­tive Ge­off Drab­ble on Tues­day said the in­ci­dents ‘will re­sult in an in­crease in de­mand for our fleet’. (DS)

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