Ill wind blows for insurers

Quite apart from the physical impact of the devastating winds and tidal surges brought about by Hurricane Irma, the financial effects could play havoc with sectors still reeling from the deluge in Texas caused by Hurricane Harvey.

Stick into the mix the effect of the strongest earthquake in a century in Mexico — not to mention the malevolent presence of hurricanes Katia and Jose, which are still barrelling around the region — and there’s no doubt somebody is going to get stuck with a mighty large bill.

Lloyd’s of London is estimating that Irma could cost the insurance industry a punchy Us$131bn, a number that could rise or fall significantly depending on precisely where it smacks Florida and with how much venom.

The tourist industry in the Caribbean islands that have taken the full force of the hurricane will be flattened, with reports suggesting that an island such as Barbuda has had 90% of its buildings and vehicles destroyed.

Orange juice futures have traded sharply up, as Florida accounts for the bulk of US orange production, while shares in cruise ship companies have fallen rapidly.

But perhaps the most vulnerable is the aptly named catastrophe finance sector, in which there has been considerable interest in the past decade from institutional investors and hedge funds attracted by high rates of return. Catastrophe bonds make up the funds that insurers and reinsurers use to pay out when events such as hurricanes and earthquakes lead to claims for property damage, and a number are likely to be wiped out in the aftermath of this catalogue of disasters.