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Barclays Predicts a Worse-Than-Expected Hurricane Season and Identifies a Potential Investment
Increased Severity of Hurricane Season
Barclays analyst Craig Rye predicts that the upcoming hurricane season will be more severe than previously anticipated in both the Atlantic and Pacific Oceans. This is largely due to warmer sea surface temperatures, as evidenced by recent readings off the coast of Florida. These warmer temperatures are a key factor in estimating the number and severity of hurricanes that will form. According to a study by Colorado State University, there are expected to be 18 named storms this season, with four of them being major hurricanes. Florida, Texas, and Louisiana are considered to be at elevated risk.
Potential Investment Opportunity
As a result of the anticipated increase in hurricane activity, property and casualty insurance data provider Verisk Analytics could benefit from higher claims. Verisk's computer system for estimating property losses, called Xactware, will see increased usage as the level of destruction rises. According to Barclays insurance analyst Tracy Benguigui, a greater number of claims would occur if a hurricane makes landfall in a more densely populated area. Additionally, the increased focus on the possibility of a worse storm season could lead to more use of Verisk's catastrophe modeling platform.
Risks and Other Opportunities
While Verisk stands to benefit from a more severe hurricane season, there are also risks involved. Increased catastrophes could threaten insurance companies on the verge of failure, causing them to leave certain jurisdictions or leading to industry consolidation. On the other hand, Rye notes that reinsurers tend to outperform during hurricane season, regardless of the severity. Munich Re and Lancashire are identified as reinsurers who may be exposed to potential hurricane losses this year. Climate analytics providers such as MSCI and S&P Global are also expected to sustain growth due to increased focus on the environment.
In conclusion, Barclays anticipates a worse-than-expected hurricane season due to warmer sea surface temperatures. Verisk Analytics is identified as a potential investment opportunity, as the company is likely to benefit from higher claims resulting from increased hurricane activity. However, there are also risks involved in the industry. Reinsurers and climate analytics providers are also expected to see potential opportunities in the upcoming hurricane season.
Conclusion: A Hot Take on the Impact of a Severe Hurricane Season on New Businesses
The Threat of a Severe Hurricane Season
Barclays' prediction of a worse-than-expected hurricane season presents both challenges and opportunities for new businesses. The increased severity of hurricanes, driven by warmer sea surface temperatures, poses a significant threat to coastal areas and businesses operating in these regions. For startups and small businesses, the potential impact of natural disasters like hurricanes cannot be ignored. It is crucial for new businesses in hurricane-prone areas, such as Florida, Texas, and Louisiana, to prioritize disaster preparedness and resilience planning in order to mitigate potential damages.
The Potential Business Opportunities
While the forecasted hurricane season brings risks, there are also potential opportunities for new businesses to emerge or expand in response to the increased need for disaster mitigation, recovery, and insurance services. Existing businesses specializing in property and casualty insurance, such as Verisk Analytics, stand to benefit from the expected surge in claims. Innovative startups focused on developing advanced catastrophe modeling technologies, real-time monitoring and alert systems, and post-disaster recovery solutions could also find a niche market.
Elevating the Focus on Climate Resilience
The predicted severity of the hurricane season reinforces the urgency for businesses to prioritize climate resilience. This presents both a responsibility and an opportunity for new businesses to incorporate sustainable practices, invest in renewable energy sources, and develop products or services that contribute to climate change adaptation and mitigation. Climate analytics providers like MSCI and S&P Global can support businesses in assessing climate-related risks, while also fostering growth in the sustainability sector.
In conclusion, a worse-than-expected hurricane season can have a significant impact on new businesses. While the threat of destruction and disruption looms, it also opens doors for innovative solutions and services that address the challenges of climate resilience. New businesses must navigate the risks, seize the opportunities, and embrace sustainable practices to thrive in the face of a changing climate and volatile weather patterns.
Article First Published at: https://www.cnbc.com/2023/07/28/one-stock-can-benefit-from-hot-seas-causing-a-severe-hurricane-season.html