Autonomous tackled a stubborn assumption in insurance investing: that the Atlantic hurricane season reliably drags reinsurer and London Market insurer stocks lower. His review of two decades of data tells a different story.
Across 33 hurricane landfalls since 2005, even the costliest storms produced only sharp, short-lived sell-offs.
On average, insurers and reinsurers actually outperformed market benchmarks in the month following landfall. Events like Katrina, Rita, and Wilma in 2005, or Hurricane Ian in 2022, didn’t trigger sustained weakness.
Instead, Theuns points to pricing cycles, capital positions, and company-level strategies as the real levers of performance.
Autonomous’ research shows location matters more than wind speed, but even then, market impact fades quickly. There’s no evidence of systemic drawdowns tied directly to hurricanes.
Broader catastrophes reinforce the point: the Tohoku earthquake in 2011 and Hurricane Sandy in 2012 caused volatility, yet long-term returns held up.
Cycle dynamics stand out. Reinsurers thrive in hard markets, with German players performing especially well.
London Market carriers often surprise by prospering in soft cycles. Theuns highlights Beazley, Hiscox, and Lancashire as firms that beat expectations in years when pricing was seen as a drag.
Autonomous also revisits seasonal trading patterns. The “winter trade” after hurricane season, often talked up by market participants, rests on a handful of unusual years. More consistent has been the “spring trade”—outperformance in the second quarter, seen in 14 of the past 15 years.
The conclusion is blunt: investors overstate the weather link. Headlines amplify storm drama, but share prices move with capital strength, underwriting discipline, and where the market sits in its cycle.
Over the past 15 years, reinsurers and London Market insurers have been among the top-performing financial subsectors in Europe, despite active storm seasons and record insured losses.
For Theuns, the real risk isn’t what blows in from the Atlantic—it’s the investor habit of misjudging what actually drives returns.
