Diversified insurance provider Insurance Australia Group Ltd (ASX: IAG) has provided an update to investors over the damage it expects to incur as a result of the storms that hit NSW this week.
The company said in a press release today that it had received over 10,000 claims in relation to the NSW storms, with the majority of those from individuals who hold insurance under the NRMA, Coles, GGU, Lumley Insurance and WFI brands.
The group said it is too early to put a financial impact on the damage of the storms and neither of its underwriting rivals in QBE Insurance Group Ltd (ASX: QBE) or Suncorp Group Ltd (ASX: SUN) have publicly declared a damage total as yet.
Of course storms are not unusual for insurers who provision for net losses associated with natural perils and other unforeseen acts on an annual basis. The businesses grow by writing more policies to more customers and profiting from the overall margin between the written premium and any payouts.
That's why mild storms like that experienced in NSW can be long-term wins for the insurers as people are encouraged to take out more insurance, while most of the payouts are provisioned for as part of the business cycle. In fact, without the storms many insurers might not even exist.
Any dip in the insurers' stock prices then may be a buying opportunity for long-term minded investors, with Suncorp and IAG preferable options over the accident-prone QBE Group.
Did you know one of the world's richest men Warren Buffett made much of his fortune from buying and holding insurance businesses for the long term?
