Harvey hits insurance stocks as loss estimates surge to US$20 billion

BOSTON/FRANKFURT: Hurricane Harvey’s whipsaw of wind and rain across Houston and the Texas Gulf Coast hurt the shares of US property and casualty insurers as Wall Street analysts estimated insured losses as high as US$20 billion.

That would make it one of the costliest storms in history for US insurers, but could ultimately help insurers and reinsurers to raise rates, some analysts said, after a period of low premiums.

“Our best guess at this point is Harvey could result in US$10 billion to US$20 billion of industry insured losses, making it one of the top 10 most costly hurricanes to hit the United States,” JPMorgan analyst Sarah DeWitt said in a research note on Monday.

Swathes of Houston were underwater on Monday, the effect of Harvey sweeping ashore on Friday as the most powerful hurricane to hit Texas in 50 years. It has since been downgraded to a tropical storm, but more rain is expected to fall on the fourth-largest US city.

Damage caused by flooding is not included in standard homeowners insurance policies and is covered by the US government.

However, flood damage to businesses is covered by commercial policies, said DeWitt, which could result in “meaningful losses for the commercial reinsurers and insurers.”

JPMorgan’s and other estimates are currently well below the US$75 billion in insured losses caused by Hurricane Katrina hitting New Orleans in 2005, but are likely to grow.

Shares of Travelers Companies Inc and Allstate Corp , two of the largest homeowners insurers in Texas, fell 2.6 per cent and 1.5 per cent respectively on the New York Stock Exchange. Shares of Progressive Corp, a large auto insurer in Texas, fell 2.3 per cent.

Harvey struck only days before senior insurance executives hold their annual meeting in Monte Carlo to haggle over reinsurance renewals as premiums remain stubbornly low across the industry.

“We think Harvey could help stabilize global reinsurance pricing, but do not expect a major turn in pricing to follow,” Kai Pan, an insurance analyst at Morgan Stanley, said in a research note on Monday. —