Here’s the extent of the storm damage for Insurance Australia Group Ltd

Shares of Insurance Australia Group Ltd (ASX: IAG) have defied the market today, rising 1.4% after the general insurer updated the market on its cost estimates for the recent storms on Australia’s east coast.

By comparison, the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) has fallen 0.1%. Suncorp Group Ltd (ASX: SUN) is trading 0.1% higher, while QBE Insurance Group Ltd (ASX: WBE) has fallen 0.2%.

Indeed, shares of Australia’s listed insurance businesses were hammered earlier in the week following what was one of the country’s worst storms in decades. After all, events such as those on the weekend can cost the insurers millions of dollars in claims, reducing the spread between the premiums they collect and the claims they must honour.

Today, Insurance Australia Group said it had received roughly 10,000 claims thus far in relation to the low pressure weather system which had impacted much of Australia’s east coast. It estimated a pre-tax net claim cost in the range of $60 million to $80 million, which mightn’t have been quite as bad as what some investors were expecting.

It has also been noted that the insurers themselves may be somewhat protected from some of the more costly claims from those properties located on the beachfront. Given the heightened risk associated with damage from sea waters (particularly with the impact of climate change), many insurers exclude damage caused by “actions of the sea”. In saying that, 10,000 claims for IAG alone is still a hefty amount.

IAG also said: “Incorporating the estimate for this event, IAG currently expects its net natural peril claim cost for the financial year ending 30 June 2016 (FY16) will approximate its $600 million perils allowance.”

While storm damage can act as a drag on an insurer’s short term earnings, it can actually be a windfall for future profits. Those customers (or non-customers) who have experienced damage this time around will be arguably more inclined to take out or increase their cover, resulting in greater premiums being collected (and invested) over time.

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Motley Fool contributor Ryan Newman has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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