Lloyd’s of London CEO, Inga Beale, has warned that the string of storms battering the US and Caribbean this autumn could cost the insurance sector $200bn.
But in an interview with the Sunday Times, she said the huge costs of the damage could benefit the insurers in the long term.
“We had Harvey, which was an unusual type of storm with masses and masses of flooding. Then we have Irma, which we have said could cost $131bn, and then if you’ve got Jose and something else coming in behind it, you could end up with a series of events that could total $200bn.”
But she added that, "almost in a perverse way", the hurricanes could benefit the insurance sector, by allowing them to raise premiums and putting off competition.
A dearth of catastrophic events in recent years has encouraged pension funds and other investors from outside the industry to dabble in offering protection against hurricanes and floods. The competition has hit premiums, denting the profits of insurers. History suggests Irma will scare away the new entrants, allowing insurers to drive up premiums, Beale said.
The $200bn figure relates to the costs for the global insurance industry. The costs to Lloyd’s will be passed in part to reinsurers. Much of the insured risk in places such as Florida is carried by the state government.
Lloyd’s has built up a £30bn reserve fund. There are no concerns that the market, which pays out £25m a day in claims, would struggle to handle the costs.