Shares in Lloyd's of London insurers leapt this morning on the hope losses from Hurricane Irma will be less than previously feared.
Lancashire's share price popped over seven per cent, Hiscox was up almost four per cent and Beazley nearly six per cent.
The wider European insurance index of stocks rose two per cent, putting it on course for its best day for four months, as continental reinsurers were also boosted.
“Insured losses (overall) are now expected to be less than many feared,” Credit Suisse analysts said.
Much of the pain, however, would not be felt by Lloyd's insurers because they only hang on to a fraction of the risk – so-called "net retention" – associated with storms. Instead, the risk is offloaded to reinsurers which in turn manage their exposure through insurance-linked instruments such as catastrophe bonds.
The majority of the cost of Storm Harvey is expected to fall on the US government. Because flooding was the key problem, a state-backed scheme called the National Flood Insurance Program will be called upon to pay out claims.
Losses from Irma, however, are likely to emanate from both flooding and wind damage – the latter exposes commercial insurers to a larger proportion of the losses.