Cost of hurricanes to insurance industry will break $100 billion, JPMorgan

cost of hurricanes to insurance

Insurers face massive bills from the three hurricane-level storms that made U.S. landfall, even before Nate.

Though it’s too early to know the insured damage total of Hurricane Nate, the cost of hurricanes to insurance industry coverage providers in the United States will already reach $100 billion, says JPMorgan. This prediction aligns with other industry players, such as Fitch Ratings.

The catastrophe left behind by Harvey, Irma and Maria will be a hard hit to insurance company earnings.

At the same time, it’s likely that the cost of hurricanes to insurance companies will boost broker stocks, according to analysts from the same firm. “We think industry insured losses from the 3Q hurricanes will approach or exceed $100bn, which should be sufficient to result in higher property insurance and reinsurance prices given it would wide out most of the industry’s excess capital,” said Sarah DeWitt, analyst from JPMorgan, in a client note.

That type of trend followed the cost of hurricanes to insurance companies in past catastrophic storms.

cost of hurricanes to insuranceFor instance, in 2005 after the hurricanes that struck the American mainland, property insurance premiums rose by 10 percent, pointed out DeWitt. She also went on to forecast that U.S. property insurance premiums would again see a similar increase. In fact, a CNBC report shared DeWitt’s prediction that homeowners insurance customers will be seeing an average premiums increase in the double digits by January 2018.

The increase in property insurance and reinsurance rates may be beneficial to insurance brokers which will see all the advantages of higher premiums without suffering any of the associated losses from the damage costs, said DeWitt. That said, while insurance broker stocks have risen after such an active hurricane season in the United States, “we think the increase in prices could be higher than the consensus expects.”

DeWitt’s recommendations include shares of Marsh & McLennan and Aon. This led her to increase her price target to $165 for Aon, from having been $155. For Marsh & McLennan, the shares price target prediction rose to $95 after having been $90, said the CNBC report.

That said, the cost of hurricanes to insurance companies also led DeWitt to reduce her earnings-per-share estimates for a number of property insurers and reinsurers. Those reductions were by over 100 percent as a result of those major storms and the disasters they left behind.

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