Tuesday, August 23, 2011

Hurricane Irene and the Insurance Companies (ALL; TRV; CB; ERIE)

In yesterday's "Irene: How to Short a Hurricane or the Political Implications of the Next Landfalling Typhoon" I had planned to talk about Florida's hurricane insurance market and what it might mean for the 2012 elections but, being a woman, Irene maintained the prerogative to change her travel plans and decided to go visit the Carolinas instead.
It would have been a good post.

The largest property/casualty insurer in North Carolina (and the rest of the country) is State Farm.
For our purposes this means no portfolio play as the giant is a mutual rather than a stock company.

Allstate and The Travelers are the two publicly traded P/C insurers with the largest exposure while Berkshire Hathaway is exposed through both its GEICO subsidiary and the reinsurance businesses.

One interesting operation is the Erie Insurance Group. It consists of nonpublic reciprocal insurers and a publicly held management company. It, like the others is a member of the Insurance Federation of North Carolina.

Chubb has some exposure but is more of a player further north, into New York and New England.
Erie and CB are the only names participating in today's market rally, ALL and TRV being up or down pennies.

Here's the weather report from Dr. Masters at Wunderground (during hurricane season he's on the blogroll at left):
...5AM Update
As of 5am EDT, Hurricane Irene was located at 20.3N, 70.1W, 105 miles southeast of Grand Turk Island. It was moving west-northwest at 12 mph with maximum sustained winds of 100 mph, keeping it a Category 2 storm on the Saffir-Simpson scale. Irene has a minimum central pressure of 978 mb.

...Track Forecast

Irene is forecast to move to the north-northwest, passing over all of the Bahama islands by Thursday evening, at which points it starts curving to the north. Irene is forecast to make landfall in the US near Wilmington, NC Saturday evening. However, it is important to note that this is not a definitive forecast, the average forecast error for day 5 is 250 miles. The timing of Irene's recurvature depends on how quickly several small troughs of low pressure in the Northeastern US move to the east. After Saturday, Irene may pose a threat to the mid-Atlantic coastline and locations further north, but it is too early to make a skillful forecast for those regions.

NHC is forecasting for Irene to become a major hurricane (winds faster than 110 mph), within 24 hours, then reaching peak intensity at 130 mph (Category 4 storm) by 8pm EDT Thursday evening.

Forecast models and adaptive observations
The different forecast models are in rough agreement until Irene nears the Carolinas. The dynamical hurricane forecasting models, GFDL and HWRF, have Irene making landfall near Charleston, SC. NGFDL (a variant of the GFDL that uses NOGAPS for background conditions) has landfall near Morehead City, NC, and the GFS has Irene crossing the Outer Banks. The UKMET forecast track splits the difference, placing Irene near Myrtle Beach, SC at landfall....MORE
Here's the 5-day forecast

And here are the computer models

Information about these models can be found at the National Hurricane Center.
Click the map to change the zoom level.