US property and casualty insurers’ shares slump as hurricane season losses mount

Insurers are expected to face catastrophe-related claims for billions of dollars from a devastating hurricane season. Catastrophe losses refer to a significant financial hit that insurance companies incur due to large-scale natural or man-made disasters.

These events have intensified over the past few years and have significantly hurt profits due to substantial payouts tied to widespread property damage, business interruptions and liability claims.

MOUNTING LOSSES

Severe and frequent natural disasters have exacerbated the industry’s retreat from high-risk areas, particularly Florida. The costs of reinsurance have also risen sharply in the state, making it more expensive for insurers to operate.

“Investors are not only thinking about the short-term hit to earnings but also the long-term affect weather change and a seasonal uptick in damage will do to the business,” said Michael Ashley Schulman, partner and CIO at Running Point Capital Advisors.

“Their credit ratings have been largely unaffected in the short term; however, if extreme weather drives people away, their long-term revenue models may be affected,” Schulman said.

Insurance broker Aon said in a report late on Sunday there was an increasing risk of life-threatening storm surge and damaging winds for portions of the west coast of the Florida Peninsula beginning Tuesday night or early Wednesday.

The U.S. hurricane season is expected to end on Nov. 30. Forecasts have pointed to an above-normal activity this year due to unusually warm sea surface temperatures in the tropical Atlantic, coupled with La Nina weather patterns.

“The insurance industry must be prepared for the possibility of a challenging second half of the year,” broker Gallagher Re said in a July report.

“These conditions, in tandem with the influence of climate change, have aided in more unpredictable and extreme events in 2024.”

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Manya Saini reports on prominent publicly listed U.S. financial firms including Wall Street’s biggest banks, card companies, asset managers and fintechs. Also covers late-stage venture capital funding, initial public offerings on U.S. exchanges alongside news and regulatory developments in the cryptocurrency industry. Her work usually appears in the finance, markets, business and future of money sections of the website.