The business of "reinsurance" involves insurance that is purchased by insurance companies to limit the total loss an insurer would experience in case of an oversized disaster like Super-Storm Sandy. In past years reinsurance was not hard to obtain.
In recent years that has changed. Massive earthquakes like the one in Japan, increasingly severe outbreaks of violent weather and floods, and other recent natural disasters have made it difficult for insurers to secure reinsurance.
The result has been that insurers have abandoned certain markets and states, or, the premiums for specific kinds of insurance have risen to all-time highs. Let's look at a chart to see how reinsurance companies like RGA have fared the past five years. The potential upside is plain to see.
Chubb took a hit from Sandy to the tune of about $880 million, which is part of the reason the stock has dropped below its 52-week high of $81.80. Like most of the other companies impacted by the October Super-Storm it had the reserves and reinsurance in place to cover the financial blow.
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