Devastating events resulting in huge cat loss, which led to weak underwriting results, have hounded the insurance industry this year. In spite of this, a gradual rise in interest rates, an improving employment scenario and other economic conditions have helped the insurance industry stand its ground with some insurers displaying better-than-expected results. With such challenges thrown at the insurance industry at large, the emerging winners have surely caught the attention of investors having raised a considerable optimism among them.
There are players with a display of brilliant performance when compared with the S&P 500 index, which is a market value-weighted index and one of the common benchmarks for the U.S. stock market. Per Bloomberg, the S&P 500 index topped the milestone of 2,500 for the first time on mid-September, surpassing the 266% rise during the 1949-56 run. The S&P 500 index have gained 14.7% so far, this year.
Below we will discuss the various scenarios that have influenced the insurance industry to a great extent.
Challenges Faced — Weathering the Storms
The insurance industry incurred moderate loss in the first half of 2017 due to hail-driven weather-related events as compared to the second half of the year, which endured the wrath of hurricanes Harvey, Irma and Maria along with the two major Mexican earthquakes. Per the data of Munich Reinsurance company, first half catastrophe losses amounted to $41 billion, while Swiss Re estimated third quarter catastrophe losses of $95 million.
Moreover, the Northern California wildfires are anticipated to affect the insurance industry in the fourth quarter. Therefore, the latter half of the year proved even costlier for the insurance industry, pertaining to the damages and losses suffered that in turn hurt the market as a whole. Notably, per Swiss Re, the total economic losses from natural and man-made disasters in 2017 are projected to be $306 billion.
The insurers’ underwriting results took a major hit, denting their overall performance. Despite the mounting losses affecting the insurers’ overall results, there were a few insurers, which weathered such setbacks and emerged as winners, on the back of their core fundamental strengths.
