It's been a stormy year for U.S. property insurers, and hurricane season hasn't even started yet.
The shares of insurance companies lately have reflected anticipation of higher premiums but analysts and insurers say there have only been modest premium increases, if any, because companies have so far reserved adequately for disasters, or losses have been lower than expected.
However, that can quickly change.
According to National Weather Service data, there are, on average, 1,200 tornadoes in the U.S. every year. This year there have been 1,076, with 875 in April alone. The cost of covering tornadoes rose, too. According to the Insurance Information Institute, from 1990-2009 the insured costs were $97.8 billion, with $30 billion between 2008 and 2010.
Sandler O'Neill analyst Paul Newsome thinks the increase in storm frequency and severity will force insurers to change their catastrophic loss models for determining premiums to charge. Typically catastrophe losses are modeled as 3 percent to 4 percent of premiums collected; he sees this rising to 5 percent to 6 percent.
For now Allstate has recorded a $1.4 billion second-quarter charge, the largest since hurricanes Ike and Gustav hit the Gulf Coast in 2008 while Cincinnati Financial said second-quarter catastrophe losses have jumped from 8.5 percent of premiums collected to 21 percent to 28 percent.
Whether shares of these and other property insurers will be helped by this year's severe weather is up in the air.