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Let’s Hope Florence Is Kinder Than Irma

14 September 2018 by lberuti

September is usually when we begin to hear about the hurricane season, and this year is no exception. 2017 was marked by the devastating impact of Irma in the Caribbean. Over the last few days, we have heard a lot about Florence, the hurricane which made landfall overnight near Wrightsville Beach in North Carolina and has begun to batter the region with water and wind. While most forecasts suggest a rapidly deceleration, the biggest peril is likely flooding with the storm remaining over North Carolina for several days. When compared to Houston which was struck by hurricane Harvey last year, the region has a lower population density, which should mean a lower financial cost. However, a larger portion of North Carolina is covered by private flood insurance. Hence a higher portion of the economic loss is likely to be insured. That is the why, even if the risk premia of insurers and reinsurers have been well behaved given the relatively low levels of hurricane activity thus far this year, they have been put under a bit of pressure since the beginning of the week. The sector is accustomed to this kind of phenomenon and the associated underperformance usually does not last, but you can clearly see on the above grapple that Insurers and Reinsurers underperformed other Financials during the past 5 trading sessions.