INSURERS and reinsurers around the globe are looking to raise rates after what looks set to be their most costly quarter on record.
Hurricanes Irma and Maria alone caused as much as $US135 billion ($F279b) in insured losses, according to modeling firm AIR Worldwide. Earthquakes in Mexico could cost billions more.
As insurers report the full extent of the damage in their third-quarter results in coming weeks, investors will be looking for signs they can claw back some of those losses by raising premiums for customers.
“Having the chance of rate increases is quite attractive,” said Mark Stoeckle, senior portfolio manager of Baltimore-based Adams Funds, which owns shares of Chubb Ltd, set to report earnings later on Thursday.
Over the next two weeks, other leading insurers and reinsurers are scheduled to report, including American International Group Inc, Allstate Corp, Swiss Re, Munich Re, Hiscox Ltd and Beazley Plc.
“The largest focus is on the pricing outlook,” said Wells Fargo Securities analyst Elyse Greenspan.
Investors already appear to be banking on higher premium rates halting a gradual slide over the past few years.
The S&P 500 property and casualty insurance index fell about 10 per cent between mid-August and the end of the first week of September, as the scale of damage from Hurricane Harvey in Texas became apparent.
Since then, the index has recovered those losses and is now up about 5.5 per cent since August 17, on a par with the S&P 500. European insurance stocks followed a similar path: the STOXX Europe 600 Insurance index is up 4 per cent since August 17.
In the United States, Travelers Cos Inc and Hartford Financial Services Group Inc, which reported results ahead of their peers, have already said they will look to raise rates after big losses in the quarter.
In Europe, Hannover Re said it is considering a 40 per cent to 50 per cent increase in rates for North American regions recently hit by disasters.
A turnaround in prices would be the first major reversal since Hurricane Katrina in 2005, the costliest natural disaster in US history.
Aberdeen Standard Investments is looking to benefit from possible rate increases, said Russell Barlow, head of hedge fund investments at the Scottish firm.
Reinsurers which take on risk from other reinsurers, known as retrocessionaires, are “one of the most attractive routes to access the uplift in premiums,” Mr Barlow said.
