Rob Coyte's Blog
Recent Blogs
- Pardon? 15-May-2012
- Bank practices during the GFC 12-Apr-2012
- Current State of Dividends for Shares 19-Mar-2012
Request a topic
Buying insuance companies after the QLD floods
The events of the last couple of weeks with the floods in QLD has been a reminder of how volatile mother nature can be. The estimated damage bill is expected to run to as much as $6 Billion which would make it Australia’s costliest disaster when compared to the 1999 Sydney hailstorms of $2 Billion and the 1989 Newcastle earthquake which cost $1 Billion.
This would obviously lead to those that are covered by an insurance policy and those who are not. Those with an insurance policy need to check whether their policy covers floods as the fine print in some policies excludes such damage.
With the large amount of expected claims to insurance companies the share prices of insurers like IAG and Suncorp have fallen dramatically since the start of the floods. It should be noted the Suncorp’s policy does specifically cover floods which means that their payouts will be considerable larger than an insurance company that can wriggle its way out of honouring the policy. However, local insurers only cover a certain amount of damage themselves and they then apply to reinsurers for any amount over that threshold. In Suncorp’s case the damage bill will be limited to around $90 million with large overseas reinsurers footing the rest. Given the cost for Suncorp is capped it may be a good opportunity to pick up these sold down insurance companies shares. Indeed, no doubt premiums will increase next year plus less people will go without insurance policies with such a disaster fresh in their minds meaning more premium income for the insurers.
This would obviously lead to those that are covered by an insurance policy and those who are not. Those with an insurance policy need to check whether their policy covers floods as the fine print in some policies excludes such damage.
With the large amount of expected claims to insurance companies the share prices of insurers like IAG and Suncorp have fallen dramatically since the start of the floods. It should be noted the Suncorp’s policy does specifically cover floods which means that their payouts will be considerable larger than an insurance company that can wriggle its way out of honouring the policy. However, local insurers only cover a certain amount of damage themselves and they then apply to reinsurers for any amount over that threshold. In Suncorp’s case the damage bill will be limited to around $90 million with large overseas reinsurers footing the rest. Given the cost for Suncorp is capped it may be a good opportunity to pick up these sold down insurance companies shares. Indeed, no doubt premiums will increase next year plus less people will go without insurance policies with such a disaster fresh in their minds meaning more premium income for the insurers.
Comments
Post has no comments.