Hurricane Matthew could trigger up to 10% pre-tax profit downgrades for Lloyd’s insurers, according to stockbroker Stockdale. It also puts into question whether some of the insurers will pay special dividends this year.

However while it is still early days in terms of overall impact, Stockdale analyst Joanna Parsons believes the impact on the insurance industry could be much lower than previously thought.

This relief is evident in the shares prices of many UK-listed insurers. Lancashire (LRE) rises 0.9% to 696p, Beazley (BEZ) nudges ahead 0.7% to 384.7p and Novae (NVA) is up 1% to 817.5p.

‘Originally, it looked like Matthew could easily be a $20bn+ insured loss, especially if it made landfall on the Floridian coast as a Category 3-4 hurricane,’ she says.

While causing devastating damage in Haiti, the hurricane had less of an impact in Florida and South Carolina than first expected. As such, the analyst questions whether the insured losses may only be $5bn to $15bn, albeit still a very large number.

If Parsons is right, it would essentially mean just a short-term hit to insurers’ earnings.

‘This is going to be a big loss and there are still a number of unknowns that could drive claims higher.

'However, the level of reinsurance means this should be more of an earnings event as opposed to a capital event for most – and it’s the latter that is need to drive rates up,’ says the analyst.

She adds: ‘We would expect this loss to stabilise the US reinsurance market at the 1 January 2017 renewals. However, at the moment (and we are still only speculating on the ultimate loss), it does not look like this will be a market-changing event.’

Issue Date: 10 Oct 2016