Written by Manya Saini
(Reuters) – U.S. property and casualty insurance stocks tumble on Monday after Hurricane Milton intensified into a Category 4 storm on its way to Florida’s west coast, making it yet another costly disaster for the industry to cover this year. did.
Insurance companies are expected to face billions of dollars in catastrophe-related claims due to the devastating hurricane season. Catastrophe losses refer to the significant financial damage suffered by insurance companies due to large-scale natural or man-made disasters.
These events have intensified in recent years, causing extensive property damage, business interruption, and large liability claims that are taking a toll on profits.
The United States has dealt with several major hurricanes in 2024, including Hurricane Debbie that hit Florida in August, Hurricane Francine that made landfall in Louisiana in September, and most recently Hurricane Helen that hit Florida that same month. are.
The S&P Insurance Select Industry Index fell 2.7% on Monday.
Increased losses
Severe and frequent natural disasters have exacerbated the industry’s retreat from high-risk areas, especially Florida. Reinsurance costs are also rising rapidly in the state, increasing operating costs for insurance companies.
Michael Ashley Shulman, partner and chief information officer (CIO) at Running Point Capital Advisors, said, “Investors are not only concerned about short-term revenue hits, but also from increased weather changes and seasonal damage.” “We’re also thinking about the long-term impact this will have on the business.”
“While there has been little impact on credit ratings in the short term, if extreme weather events keep people away, it could impact long-term revenue models,” Schulman said.
Florida was preparing for its largest evacuation since 2017 on Monday as Milton, heading for the West Coast in the wake of devastating Hurricane Helen, gathered strength in the Gulf of Mexico. It could affect the areas already destroyed by Helen.
Heritage Insurance, which has a lot of influence in the state, last saw a 26% drop. Universal Insurance and HCI Group fell 15% and 16%, respectively.
Sector standard bearer Travelers Companies was last down 3.5%, while Allstate and Assurant each fell 4%.
Insurance broker Aon said in a report late Sunday that the risk of life-threatening storm surge and wind damage is increasing for parts of the west coast of the Florida peninsula from Tuesday night into early Wednesday morning.
Hurricane season in the United States is expected to end on November 30th. Above-normal activity is expected this year due to unusually high sea surface temperatures in the tropical Atlantic Ocean and the La Niña phenomenon.
the story continues
“The insurance industry needs to prepare for a potentially challenging second half of the year,” brokerage firm Gallagher Re said in a July report.
“These conditions, combined with the effects of climate change, will lead to even more unpredictable and extreme events in 2024.”
(Reporting by Manya Saini in Bengaluru; Editing by Vijay Kishore and Krishna Chandra Eluri)
