Isabel Could Cause Major Losses: Smith Barney
NU Online News Service, Sept. 15, 4:20 p.m. EDT?Hurricane Isabel, still days away from potential landfall in the United States, could cause significant insured losses, according to New York-based Smith Barney.
Ronald Frank, analyst at the New York-based finance investment firm, said in his research note today that "even if Isabel makes landfall with weaker force than it has presently, it clearly has the potential to be a major insured loss event."
Isabel, a Force-5 hurricane, currently seems most likely to threaten the Mid-Atlantic states, Mr. Frank added, but it may also reach as far as Long Island and Connecticut.
Mr. Frank pointed out, though, that since Hurricane Andrew in 1992, insurers and reinsurers have come "a long way" in terms of the technology and sophistication with which they model and control their catastrophe exposures. And these advances, he predicted, would spread losses fairly efficiently across the industry through the companies' respective capital bases.
Furthermore, the "obvious flip-side" from any major insured losses is that "the larger the industry loss, the greater the likelihood that pricing in the property insurance and property reinsurance markets–where some stabilization and/or softening has recently been observed–would be positively affected," he commented.
Separately, Lehman Brothers, another investment firm based in New York, noted in its research note today that a number of major insurers have significant exposures to Hurricane Isabel. One comparison Lehman Brothers offered was the loss from Hurricane Hugo, a similar hurricane that caused more than $4 billion of damages when it hit the Mid-Atlantic states along the eastern seaboard in 1989.
Chris Winans, an analyst at the firm, said that among publicly traded companies, the Allstate Corporation in Northbrook, Ill, has the greatest exposure to Hurricane Isabel, ranging from about 13 percent of its earnings-per-share hit for a $1 billion cat loss to a whopping 65 percent earnings hit for a $5 billion loss.
"In order of exposure, based on homeowners and auto physical damage market share, Allstate is the most exposed, followed by Progressive, Travelers, SAFECO and Hartford," observed Mr. Winans.
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