Broker snap: Lloyd's syndicates watching 'hurricane Earl'

1st Sep 2010 11:49

Hurricane season is underway and a 120 miles per hour category four hurricane, 'hurricane Earl', could hit land in North America later this year. For once, it looks as if the Gulf of Mexico will not be affected but a number of Lloyd's syndicates will be monitoring its progress for fear it will hit the eastern seaboard of the USA.Research firm Equity Development said "there is a (very low probability) risk of it hitting New York or one of the other cities in New England and a significantly higher but far cheaper risk that it will hit Nova Scotia, by which time it may have fallen back to a Category 2 storm. It is also possible that it will hit the Carolinas, an area materially less 'expensive' for insurers," analyst John Borgars speculates. The Lloyd's syndicates most exposed to risk, according to Borgars, "are the three side-car syndicates 6103 (MAP), 6104 (Hiscox) and 6106 (Amlin)," all of which appeared to be "staggeringly profitable" in 2009.If hurricane Earl does make landfall then Equity Development will cool a little on the Lloyd's sector, even though it believes there are many constituents of it that are undervalued."It is obviously a case of watch and wait: the biggest financial impact, this side of the ocean, if Hurricane Earl hits land in the USA will be on the individual Names backing the sidecar syndicates, with a much smaller effect on shareholders in Amlin, Beazley, Chaucer, Hampden (it has provided a modest amount of capital to most of these syndicates) and Hiscox," the research firm said.