Hurricane Isaias Could Cost Insurers Billions

Senior insurance equity analyst Matthew Palazola is here in studio. That was so interesting to me because when you do storm coverage, one of the things you have to do when you're finding a hotel is ask them what it's rated to. You're going around asking days in. Are you cat four? Are you cat five? When you look at storms like this, what are the biggest risks to property? Yeah. So when we look at storms like this, we typically will look at historical analogs and say, okay. What what storm hit in a similar region of a similar strength, and what were the losses there, to impact the insurance companies? If you look at this, so way back in 1995... So I was in high school. Christina, we're we're all so young. Fraher is still incredibly young. Not We can present that. Yes. We can present that. So there was hurricane Opal hit in a very similar area. That caused losses of about $2,000,000,000 inflation adjusted. That is a relatively mild hurricane. So I was doing some work this morning. I said, okay. That's 1995. Property values increased. It was, like, almost, like, eightfold since then, so maybe the losses were a lot higher. But very interesting point in that prior bit was the building standards have increased significantly. So there's these kind of counterbalances. So what we're looking at is probably losses in the single digit billions of dollars for this event. Take us inside the Palazola household on a weekend when there's a storm like this hitting. You mentioned you were up early, you know, in your most recent... Oh, you said it's too early to kind of assess what the damage is is gonna be. When do you find that out customarily? When do you kind of find out the weight that this is gonna put on these insurers? I send my three daughters out to to the storm region, and they they assess it. No. Well, I was actually coincidentally in Destin, Florida earlier this year. Wow. Lovely area. It was great. Nice beaches. Yeah. And I could see the buildup there. But more directly to your to your point, you know, we are... What will happen is we we make these kind of high level look down analysis, and we're looking at it from the perspective of how does this impact insurance companies. Obviously, there's a human element to the whole thing. My job is looking for the insurance aspect. So we do that top down that I had kind of described. What you will see probably mid next week is there's companies that essentially do this for a living. They have satellite imagery. They they really analyze the whole region, and they'll come out with much more granular numbers. Our numbers tend to be pretty close to what they do, so, I think we'll hear that... Those mid single digits later in the week. When you look at the hurricane season that we've had so far and even last year, they were they were pretty mild. And I feel like that came on the heels of some really bad seasons. What does this mean for the insurance industry as a whole? Do they get time to catch up in these seasons when there's less damage? Does it keep the prices slightly lower even as other factors including, you know, just rising tides and the price of houses are making it more sure... More expensive around? They do. Yes. And interesting stat. This is the latest first hurricane of the Atlantic season since nineteen o five. So we started tracking. Right? So this was a very mild hurricane season. Last season was mild as well. There's the El Nino effect. So I'm just an an amateur meteorologist, so I'll I'll explain it briefly is warmer winds in the Pacific, drive trade winds kind of across the globe. Those hinder Atlantic hurricane activity. K? So that's what's been happening this season, why we've seen this this kind of late storm. And to the point, insurers are building up a lot of capital. The reinsurance industry, which is insurance for insurance companies Jeez. Those are actually seeing kind of abundant capital. So the prices there are going down a lot. I wouldn't get your hopes up on your home insurance prices going down just yet, but those companies are doing actually well this year. On that note, last question here. If I work my life away for a time share down in Destin Mhmm. To quote the great Taylor Swift and Florence Welch, can I get insurance for it? How hard is it to get insurance? So it's it's gotten easier. Uh-huh. So we've had actually the rare case of kind of government and industry coming together and and working out a a win win solution. There was a lot of fraud in Florida pertaining to homeowners insurance. And what happened was the state actually put in a bunch of reforms that have so far worked. Fraud and, like, claiming for things that hadn't happened or FEMA fraud or all of that? It was kind of more exaggerating things that had happened. So your roof gets damaged. You have a contractor come out. He gets assigned the benefits. He then kind of overstates all of the damage, gets you a new roof, and a cost of a claim goes up over a 100%. And that pushes up cost for everybody. The state came and made a bunch of reforms, and they have seemed to work. We haven't been tested by a major storm since that that has happened, but, seems to be working so far in Florida at least. So you should be able... If you keep working, you should be able to get there again.