Shares of insurance companies jumped on Monday after Hurricane Irene caused less damage than expected over the weekend.
In trading that started on time Monday morning in spite of some post-storm delays in the New York transit system, insurance companies were high performers. Allstate Corp. rose 8.2%, Lincoln National increased 8.1%, Genworth Financial increased 7.2%, MetLife gained 6% and Principal Financial increased 6.2%, according to the Wall Street Journal.
One of the Dow Jones Industrial Average’s strongest performers was insurer Travelers Cos. Inc., which rose 4.7%. The Dow increased 240 points, or 2.1%, to 11,524. The Standard & Poor's 500-stock index gained 30 points, or 2.6%, to 1,207. The Nasdaq Composite rose 74 points, or 3%, to 2,554.
Insurance company shares had dipped as Irene approached last week. On Thursday, Aug. 25, Allstate and Travelers Cos. both lost about 3%, Dow Jones Newswires reports. Tower Group Inc. fell 5.4% on Thursday and an additional 4% on Friday.
"There's a sigh of relief that the hurricane didn't do anywhere near the damage people feared," Tom Donino, co-head of trading at First New York Securities, told the Wall Street Journal.
Also much of the damage caused by Irene appears to be from flooding, which isn’t covered under most homeowners’ insurance policies. One workaround for businesses: If floods block access to a commercial properties, insurance policies might allow interruption-of-business claims, Tom Larsen, a senior vice president at disaster-modeling firm Equecat, told the Christian Science Monitor.
Equecat has estimated the hurricane caused between $200 million and $400 million in insured losses in North Carolina and South Carolina, according to Dow Jones Newswires. Its loss estimate for mid-Atlantic states, New York and New England is forthcoming.
In spite of the smaller impact of Hurricane Irene, 2011 is not going to be a great year for insurance companies, the New York Times reports:
The A. M. Best Company, which rates the financial strength of insurers, called the level of natural disasters this year “unprecedented” in a report on the American insurance industry issued last week. The company, based in New Jersey, said disaster-related losses this year had already exceeded the total for all of 2010. It estimated the losses at $27 billion through June 30, compared with $11.9 billion in the first six months of last year and $19.6 billion for all of 2010. The company based its findings on a survey of roughly 150 insurers, which it said accounted for 80 percent of the industry.
So far this year, insurance companies have covered losses for disasters such as the March earthquake and tsunami in Japan; a hailstorm in Oklahoma that caused a billion dollars’ worth of damage; and tornadoes and hailstorms that hit Tuscaloosa, Ala., and Joplin, Mo., in the spring.