If you’ve noticed a lot more severe weather events, you are right. It isn’t just media hype as climate-change deniers would have you believe. There’s been a record-breaking number of severe storms this year so far.
You might think these trends are terrible for insurance companies offering property and casualty coverage. But in the twisted world of insurance, the exact opposite is true. While costly disasters hurt near term, the payouts have two positive effects on insurers. Climate change isn’t the only trend favoring insurance companies. Higher inflation means property is more valuable and repairs cost more, so insurance payouts rise.
The bottom line is that together, all these trends, including climate change, create substantial pricing power in the insurance sector. In the past five years, property and casualty insurance pricing has more than doubled, Locraft said. Now, expect more of the same. Here are three insurance companies that look like good investments because they benefit from these trends. The first two are favorites of Locraft, at T. Rowe Price. The third comes from the outperforming money managers at the Marshfield Concentrated Opportunity Fund
2. RenaissanceRe Holdings: Bermuda-based RenaissanceRe Holdings is “a top five reinsurance company, but it is particularly good in property and casualty reinsurance,” Locraft said.