Monday, August 29, 2005
Katrina bill expected to hit insurers for $25b
As hurricane Katrina passes through Louisiana and Mississippi and slowly loses ferocity, early reports from the area cite catastrophic damage to the the Gulf coast of the USA. The historic centre of New Orleans, especially vulnerable due to it's low-lying location has been particularly badly hit:
The storm passed just east of New Orleans, straining the system of levees and pumping stations that protect the low-lying city. About 70 percent of the city sits below sea level. The National Weather Service reported that water had overtopped levees in Orleans and St. Bernard parishes. The Lower 9th Ward, on the east side of New Orleans was under five to six feet of rising water after three pumps failed
and now estimates are starting to arrive on the likely costs to the insurance industry:
Hurricane Katrina could end up costing US insurers as much as $25bn... estimates across the industry range from $12bn to $25bn. At such levels, Katrina would be more expensive than 1992's Hurricane Andrew - which at $21bn in today's money is the most expensive in US history.
It should be noted here that last year's hurricane Ivan's losses caused Goshawk to exceed their reinsurance cover, resulting in a loss for the first half of the year. Though the picture is still unclear, I expect the market will have been badly shaken by this hurricane and will start to mark down the value of listed insurers tomorrow. This time last year, that presented substantial opportunities as shares like BRIT and Chaucer touched unreasonable lows. But the insurance climate has now changed somewhat and we are into a declining premium environment. If more hurricanes of similar strength hit the US coast this year a number of insurers could find themselves very stretched. That's a double edged sword. A severe hurricane season could bring both outstanding opportunities to buy shares cheaply, but only after inflicting heavy losses on investors in the sector.
I am going to have to hold tight here.
The Artful Dodger
The storm passed just east of New Orleans, straining the system of levees and pumping stations that protect the low-lying city. About 70 percent of the city sits below sea level. The National Weather Service reported that water had overtopped levees in Orleans and St. Bernard parishes. The Lower 9th Ward, on the east side of New Orleans was under five to six feet of rising water after three pumps failed
and now estimates are starting to arrive on the likely costs to the insurance industry:
Hurricane Katrina could end up costing US insurers as much as $25bn... estimates across the industry range from $12bn to $25bn. At such levels, Katrina would be more expensive than 1992's Hurricane Andrew - which at $21bn in today's money is the most expensive in US history.
It should be noted here that last year's hurricane Ivan's losses caused Goshawk to exceed their reinsurance cover, resulting in a loss for the first half of the year. Though the picture is still unclear, I expect the market will have been badly shaken by this hurricane and will start to mark down the value of listed insurers tomorrow. This time last year, that presented substantial opportunities as shares like BRIT and Chaucer touched unreasonable lows. But the insurance climate has now changed somewhat and we are into a declining premium environment. If more hurricanes of similar strength hit the US coast this year a number of insurers could find themselves very stretched. That's a double edged sword. A severe hurricane season could bring both outstanding opportunities to buy shares cheaply, but only after inflicting heavy losses on investors in the sector.
I am going to have to hold tight here.
The Artful Dodger
Comments:
Post a Comment
