Why did prices of insurance firms not drop after the floods surrounded by the uk?
Answers: This is a really interesting phenomenon in the insurance industry. Contrary to what would be intuitive, the price of insurance firms often INCREASES after principal disasters. Certainly disasters cause insurance firms to have to write checks, thus decreasing their lolly position, hurting their balance sheet, and therefore, you'd expect, the stock price. Just as you'd expect, right? But a few things counter this effect. One is that insurance companies themselves repeatedly hold insurance from re-insurers against such disasters. So in many cases they're somewhat shielded from big hits similar to this. Additionally, one of the effects of major disasters is to suddenly convince a lot of those that they, too, now need insurance. "If it happen to them, it can happen to me" sort of attitude. And so you find that after major disasters, insurance firms suddenly are competent to sell tons of new policies. The inflows from up to date policy sales often more than compensate for outlays to effect policy holders. And so the stock price remains just fine.
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