Will tropical storm seasons become a topic of conversation with your clients?

September 22, 2017 by Andy Penkalski

about the author:

Andy Penkalski

Director, marketing

Andy oversees the breadth of go-to-market initiatives for Advicent, including product marketing, lead generation, public relations, and partner learning and development. He is interested in always discovering new tools for brands and businesses to more effectively reach their audience and improve metrics for success within their own organization.

Every September news cycle typically involves a heightened focus on hurricane activity in the Gulf Coast and Caribbean Sea. This year’s coverage is piping through at a higher decibel level due to the remarkable flooding that Hurricane Harvey and Hurricane Irma brought to Houston and Miami, respectively.

With two additional Hurricanes – Maria and Jose – poised to make US landfall, investors may begin to wonder, “How long does a hurricane season need to last for a portfolio adjustment to not be a poor reactionary decision?”

Hurricanes impact investments

Both named storms and hurricanes have trended upward over the last century, but even the most tragic storm seasons to occur in the past twenty years have been followed by strong market rebound in the successive 12 months. Following the 1992 season, which included Hurricane Andrew, stocks rose 10.8 percent. Stocks rose 5.8 percent following Hurricane Katrina in 2005 as well.

Still, pockets of the market are witnessing some risk-averse behavior in the wake of Hurricane Irma. The SPDR S&P Insurance exchange-traded fund dropped initially almost 6 percent between Harvey and Irma. However, as a CNBC article points out,  most of the mainline insurers do not offer coverage within the state of Florida, making some of this recent behavior even more misplaced. Many of those exact corporations have since rebounded since Irma’s bark ultimately proved to be worse than its bite.

So like most market volatility, these truly are storms that every client portfolio can ride out. As mentioned, hurricane seasons are becoming incrementally longer periods with incrementally more named tropical storms, but how insurance companies adapt their business models to suit this ongoing risk-averse trend still remains to be entirely seen.

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