Most people look at the weather forecast whether it is their app on the phone, watching the Weather Network, listening to the weather forecast when they wake up on the radio or TV, knowing the weather forecast is important. For the insurance industry, when the forecaster says it will nice that is music to the ears of the insurance company. Ideally in the insurance world you want few claims and many people paying their insurance. If the law or the bank requires you buy insurance, the insurance company feels that much better.

In an article by Emily Flitter of the New York Times News Service, the cost of hurricane season weighs heavily on the insurance industry. Things were going well, hurricane season was manageable, then Hurricanes Helene and Milton came calling.

Sridhar Manyem, an analyst for insurance ratings agency AM Best, noted while it is early, estimates of Hurricane damage costs will be in the $200 billion range. In the early stage of a storm, analysts look to past hurricanes and add onto what is seen and expected costs to get a number.

If the storm is too expensive for insurers, it will have a knock-on for customers. It will give the insurance companies a reason to either raise rates or stop selling policies in the certain areas. If a house has damage, the insurance companies are very picky on what caused the damage. If it was wind, then likely to be covered. If it was water, then likely not to be covered.

If the damage is flooding, then the number one insurer is a creature of the government called National Flood Insurance Program, which provides 2/3’s of all flood insurance coverage in the US.

The program is plagued with problems and owes $20 billion to the US Treasury. In normal circumstances this means insurance rates need to be increased. However, that would make insurance unaffordable to the people who need to buy flood insurance in order to keep their mortgages.

Similar to every industry in the marketplace, small insurers that are poorly managed or have concentrated business too narrowly, they could collapse under the weight of claims from storms. It was noted, since 2021, nine property and casualty insurers have gone bankrupt in Florida.

Linking to dividend paying stocks, while the overall economy is dominated by small and medium sized business, there are many large businesses that are profitable and can pay dividends on a yearly basis. Sometimes being large means a diversification of cash flows which helps the company through all the crisis which occur. Companies till have to well managed and execute on their business plan, but size can help. In private business, the rule of thumb is the company can have the customer it wants or does not want, in government, the organization is expected to appeal to everyone, not participating in an area is good for the company. If you were a consumer, you might have a different opinion, but the health of the company is why you invest and you like nice days.

There are more questions than answers, till the next time – to raising questions.