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This year's North Atlantic hurricane season is expected to be very active, potentially bolstering prices across several lines of property and casualty insurance and reinsurance, thereby catalyzing actions by certain underwriters, CFRA wrote in a recent note. .
Department of Atmosphere, Colorado State University science is predicting a “very active” hurricane season in 2024, with an expected total of 23 named storms, 11 hurricanes, and five major hurricanes (Category 3 to 5).
By comparison, in 2023 there were 20 named storms and seven hurricanes. Three of the hurricanes reached “major” status.
As such, analyst Catherine Seifert said, “We believe the most prudent way to take advantage of the still-firm insurance pricing environment is to acquire shares of reinsurers and insurers with limited or manageable exposure to catastrophes and/or hurricanes,” including Berkshire Hathaway (New York Stock Exchange:BRK.B) (New York Stock Exchange:BRK.A), American International Group (New York Stock Exchange:AIG), Progressive (New York Stock Exchange: PGR) and Arch Capital Group (NASDAQ:ACGL).
He added that insurance brokers with no claims exposure, primarily Arthur J. Gallagher (New York Stock Exchange: AJG), also offer investors a compelling opportunity in a strong pricing environment.
The National Oceanic and Atmospheric Administration also predicts above-normal hurricane activity for the Atlantic basin this year due to a confluence of factors. These include near-record warm ocean temperatures in the Atlantic Ocean, the development of La Niña conditions in the Pacific, reduced Atlantic trade winds, and lower wind shear, all of which tend to favor storm formation. tropical.
CFRA's Seifert noted that the dynamics of an above-normal hurricane season driving up prices for numerous lines of P&C insurance have been widespread for years, based on commercial property pricing trends.
“Average rate increases for commercial property coverage have outpaced those of the overall commercial lines market over the past several years,” the note said, citing a quarterly survey by the Board of Insurance Agents and Brokers.
This comes at a time when insured catastrophe losses in the United States over the past decade have generally increased, with losses approaching $100 billion in each of the last few years. Therefore, insurers have maintained their pricing power in an effort to offset potential insured losses from catastrophes.
It's worth noting that Berkshire's (BRK.A) first-quarter 2024 insurance earnings were partially bolstered by improved operating results, particularly at GEICO, which underwrites property and casualty policies. Its general insurance business suffered no significant catastrophe losses in the quarter, down from $350 million in the year-earlier period.
The Peer tab of Seeking Alpha compares BRK's key statistics with AIG, PGR, ACGL and AJG. This SA stock screener shows investment ideas in the general insurance space.
