Insurance stocks feel hurricane

NEW YORK – This year’s hurricane season has many homeowners looking more closely at the fine print on their insurance policies, and many investors eyeing the impact on insurance stocks.

With total insured losses from Hurricanes Charley, Frances and Ivan estimated at anywhere from $15 billion to $18 billion, this is shaping up to be a difficult quarter for property and casualty insurers. But as terrible and costly as the damage has been, a number of mitigating factors suggest that the insurance industry will weather the season relatively well.

One thing working in the insurance companies’ favor is that so much of the damage occurred in Florida, where vast industry reforms after Hurricane Andrew struck in 1992 shifted more of the financial risk to consumers. The most expensive storm in history, Andrew caused nearly $20 billion in insured damages, and put 11 smaller insurers out of business.

Since Andrew, premiums in the most disaster-prone areas of the state have risen 100 to 150 percent. Disaster deductibles are now calculated in terms of percent of total property value rather than dollar amounts – a homeowner might be liable for the first 5 percent of damage rather than the first $1,000. And a state-sponsored catastrophe fund was established as a sort of insurance for the insurers.