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Funding worries as the hurricane season starts
01.06.09
Today marks the official start of the hurricane season and insurers and US energy companies are warning that there is a shortage of capital to cover potential disasters.
Last year, with Hurricanes Ike and Gustav, was the third-worst on record in the west Atlantic, costing about £14.6 billion.
After the collapse of Lehman last year, hedge funds have withdrawn cash and been less keen to invest in disaster bonds, where yields are trading at near-record levels.
At the same time, reinsurance capacity has been cut and so costs have risen. Forecasters say the chances are this season will no worse than usual. America's National Weather Service Prediction Centre said there is a 70% chance of having between nine and 14 tropical storms, of which four to seven could become named hurricanes, which could mean one to three major hurricanes.
Insurer Marsh says a severe season could bring "big pressure" on the Gulf of Mexico energy industry. It reckons reinsurance capacity has fallen 10% for this season with hedge fund capacity down by a third.
The first three hurricanes of the season will be named Ana, Bill and Claudette.
