Though Hurricane Laura was reduced to a tropical storm as it entered Arkansas after making landfall near Cameron, LA on the Gulf Coast, it is expected to have caused significant damage. Colorado State University (CSU) predicts an ‘extremely active Atlantic hurricane season in 2020’. There will be 24 named storms, including 12 hurricanes and six major hurricanes per CSU.
The third quarter of a year generally bears the brunt of catastrophes as the hurricane season typically starts in June and lasts through November during a year, gathering strength in August and September. Per a report on Aug 5, 2020, CSU estimates ‘hurricane activity will be about 190% of the average season’. This compares with last year’s near average Atlantic hurricane season and hurricane activity being 120% of the average season. There have already been nine named hurricanes so far in 2020. Per a report by AccuWeather, Hurricane Laura might cause about $25-$30 billion in economic losses while analyst from Wells Fargo Securities projects insured loss between $8 and $15 billion. A.M. Best anticipates “losses from Hurricane Laura to stress balance sheets that have already been weakened by the COVID-19 pandemic” while Moody’s anticipates “losses to hit reinsurers as well as insurers as the U.S. Gulf Coast is a peak catastrophe zone for reinsurers, and those with exposure to Texas and Louisiana could incur meaningful losses” per a report in Insurance Journal. Though shares of property and casualty insurers like The Allstate Corporation ( ALL Quick Quote ALL - Free Report) , The Progressive Corporation ( PGR Quick Quote PGR - Free Report) , The Travelers Companies ( TRV Quick Quote TRV - Free Report) , The Hartford Financial Services Group ( HIG Quick Quote HIG - Free Report) and Chubb ( CB Quick Quote CB - Free Report) have gained in the last trading session, these insurers have exposure to areas where Hurricane Laura made landfall and therefore we may see an adverse impact on the stocks’ performance in the coming days. Losses from Hurricane Laura will likely dent underwriting profitability of these insurers. Though catastrophes are a concern for insurers due to the high degree of losses incurred, they implement price hikes to ensure uninterrupted claims payment. In the first quarter of 2020, commercial insurance pricing improved 14%, property rates increased 21%, casualty pricing rose 5%, U.S. financial and professional lines pricing increased 23%, cyber insurance pricing rose 6%, and auto pricing was up 10%, per Marsh LLC in a report published in Business insurance. Further Marsh noted that the COVID-19 outbreak ‘had an insignificant impact on pricing in the first quarter’ but will have a greater impact on pricing in the remainder of 2020. Also, reinsurance covers will likely help these insurers weather losses. Reinsurers also get room for firming up prices. Shares of reinsurers like RenaissanceRe Holdings ( RNR Quick Quote RNR - Free Report) and Everest Re Holdings ( RE Quick Quote RE - Free Report) gained in the last trading session. Today's Best Stocks from Zacks
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