Fairfax exposure to hurricane States

[opihiman2]

Hello everyone,

 

Does anyone know how much exposure Fairfax has to the South Eastern states?  I read that NOAA predicts a much more turbulent year for hurricanes.  I'm inclined to believe.  We had a really good El Nino year.  Probably the best year of surf in Hawaii since Hurricane Katrina hit several years ago.  And I read that Washington and Vancouver were exceptionally warm this year, and California especially wet.  That's why the Winter Olympics were on shaky grounds with the lack of snow.  I know there is a strong correlation with Pacific El Ninos and Atlantic hurricanes.  When big catastrophes hit, the insurers often get hit pretty hard, yeah?  So, is that the best time to buy?  I been looking at Fairfax, maybe Berkshire, since the guys running those two are reputable and got good head on their shoulders.  Also, they are undervalued.  I got the itchy finger to buy, but thinking might be better to hold back till the risk of hurricanes pass. 

[ERICOPOLY]

Hello everyone,

 

Does anyone know how much exposure Fairfax has to the South Eastern states?  I read that NOAA predicts a much more turbulent year for hurricanes.  I'm inclined to believe.  We had a really good El Nino year.  Probably the best year of surf in Hawaii since Hurricane Katrina hit several years ago.  And I read that Washington and Vancouver were exceptionally warm this year, and California especially wet.  That's why the Winter Olympics were on shaky grounds with the lack of snow.  I know there is a strong correlation with Pacific El Ninos and Atlantic hurricanes.  When big catastrophes hit, the insurers often get hit pretty hard, yeah?  So, is that the best time to buy?  I been looking at Fairfax, maybe Berkshire, since the guys running those two are reputable and got good head on their shoulders.  Also, they are undervalued.  I got the itchy finger to buy, but thinking might be better to hold back till the risk of hurricanes pass. 

 

The correllation lies with strong El Nino creating upper level wind shear that weakens and deters Atlantic hurricanes, making landfall improbable.  Currently I believe the threat is from a weakening El Nino (the deflector shield is down).

 

 

[beerbaron]

I'm curious to know how accurate weather forecasters have been in the last 20 years for such a long term outlook. Anybody saw any meaningfull data on the subject?

 

BeerBaron

[Uccmal]

After K, R, W.  Fairfax adjusted their exposures all along the hurricane zones.  They practice diversification by minimizing exposures to any one hazard, location, etc.  The details are not forthcoming but there has been discussion in past annual reports.  They also got out of the oil rig insuring business after KRW. 

 

They also practice price point exposure and limits on Re-insurance where they can (I would call it band).  That being said they are in the business of P&C insurance so if they have a corporate client who wants insurance for their D&Os and their properties across the States they will have exposure in some areas.

 

In every AR they mention that they keep more than enough cash at Parentco to cover another KRW plus a California Earthquake.  Prem is implying with this statement that FFH can weather a series of massive events without raising any money, during or afterwards.  Thats a hell of an advantage.  The weakest insurer that survived KRW becomes the stongest. 

 

As far as hurricanes this year promises to be a doozy.  The El Nino has receded, being replaced by an La Nina.  The Gulf waters and waters off Africa where these things are spawned is 2-4 degrees C above normal for this time of year.  There is not alot to cause it to cool down at this point.   

 

Anecdotally, I would say the accuracy is usually pretty good.  When they are off they are spectacularly wrong such as last year. 

[T-bone1]

I have read that deepwater oil rig insurance rates are up 50% and shallow water up 20% already.  I would bet with the increased scrutiny and regulatory focus the chances of a (non-hurricane) disaster is down a great deal.  I wonder if FFH will increase its exposure here.

[twacowfca]

After K, R, W.  Fairfax adjusted their exposures all along the hurricane zones.  They practice diversification by minimizing exposures to any one hazard, location, etc.  The details are not forthcoming but there has been discussion in past annual reports.  They also got out of the oil rig insuring business after KRW. 

 

They also practice price point exposure and limits on Re-insurance where they can (I would call it band).  That being said they are in the business of P&C insurance so if they have a corporate client who wants insurance for their D&Os and their properties across the States they will have exposure in some areas.

 

In every AR they mention that they keep more than enough cash at Parentco to cover another KRW plus a California Earthquake.  Prem is implying with this statement that FFH can weather a series of massive events without raising any money, during or afterwards.  Thats a hell of an advantage.  The weakest insurer that survived KRW becomes the stongest. 

 

As far as hurricanes this year promises to be a doozy.  The El Nino has receded, being replaced by an La Nina.  The Gulf waters and waters off Africa where these things are spawned is 2-4 degrees C above normal for this time of year.  There is not alot to cause it to cool down at this point.   

 

Anecdotally, I would say the accuracy is usually pretty good.  When they are off they are spectacularly wrong such as last year. 

 

 

Where did you hear that The El Nino had been replaced by a La Nina?  Last I heard, the El Nino was expected to fade and be replaced by one of the more frequent intermediate states with a low probability that a La Nina would arise during this hurricane season.

[Uccmal]

Fair enough.  It is a continuum rather than a defined state.  As per Ericopoly above, the state where wind shear dampens Caribbean storms is the El Nino.  Anything else on the continuum does not have this effect.  We are no longer in the El Nino state. 

[opihiman2]

That is bizarre.  I posted a response to this thread awhile back with a link to a surfing site that offers a pretty good analysis of El Nino to neutral to La Nina correlations to hurricanes in the Atlantic.  It's gone.  What the heck?

[Sea Island]

Definately LA NINA currently. Weather forecasting accuracy is abysmal past the hourly.  Also regarding the rig insurance, it might not matter if there isn't any drilling taking place and perhaps rates in Brazil are not as good as they are in the GOM?

[Guest longinvestor]

October is round the corner and it has been a mild hurricane season thus far!

[twacowfca]

October is round the corner and it has been a mild hurricane season thus far!

 

Yup.  The recent unusual weather system that drenched the US east coast pumped an enormous amount of heat northward out of the Gulf and Carribbean, reducing the likelihood of a major hurricane's impacting the US in the waning weeks of the hurricane season.