Investors are betting insurance giants’ profits will get a boost from lower disaster claims this summer due to hot and dry conditions caused by a likely El Nino weather pattern, as the industry also rakes in higher revenue after steep increases in premiums.
Jarden analysts have said that over the past half-century Australian and New Zealand insurers’ catastrophe costs during El Nino or “neutral” periods have been about half those seen in La Nina, highlighting the potential “upside risk” for IAG and Suncorp. Morgan Stanley analysts have also said insurers were “well-placed to over-earn during El Nino”.
The northern hemisphere summer included record-breaking heatwaves this year, and the Bureau of Meteorology has said there is a 70 per chance of an El Nino event this summer.that home insurance premiums had soared about 20 per cent a year on average, while premiums for car insurance had jumped by about 15 per cent.
IAG shares have risen more than 12 per cent since early June, and Russell said a key reason for the rally was the prospect of El Nino, alongside the sharp increase in premiums for home and motor cover.
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