NEW YORK ( TheStreet) -- When I was just starting out as a business reporter, in the late 1970s, my best friend was in the insurance business.He was hugely entertained by it, and entertained me in turn. His job was to put together "excess and overage" packages for Houston's riskiest businesses -- construction companies, pipeline constructors and oil refiners.
What I learned from this is that disaster is great for insurers. And so it has been in the case of Sandy. Your best play since the storm struck last October has been American International Group (AIG - Get Report). Since the super-storm hit of October 2013 AIG stock is up 25%. It fell in the weeks right after the storm, and from those mid-November lows it's up nearly 50%. How can this be? Two things happen in the wake of a catastrophic event. Everyone rushes to buy insurance, and insurers raise rates. Higher rates are necessary because capital is scared away by big payouts. They see the risk, they lost their money. People are also frightened about what might happen "next time," and rush to increase their coverage if they can.