Actually, natural disasters DO affect IAG on a few fronts.
Firstly adverse natural hazards experiences drives up the cost of reinsurance in future treaty years. This squeezes insurance margins further.
The other issue is that insurers typically buy coverage as a less expensive substitute for capital - at the expense of the net insurance margin.
As a result, they need to set reasonable retention points for their reinsurance treaties for each event. The issue arrises when there are many smaller events in a given year like we have been seeing lateley - (for example with a 50m retention and a 10bn limit 3 $50m events are worse than one $5bn event - of course this is simplified)
IAG Price at posting:
$4.72 Sentiment: None Disclosure: Not Held
(20min delay)