there are risks to this sector certainly, but none as bad as the systemic risks that have punished the banks this year. And yet all financial stocks have been caught up in the same whirlwind. Investment incomes have been drab this year for P&C insurers and Nat Cat losses pretty bad, but this is actually good news as it means the insurance market will harden next year (for the first time since 9/11) - the odd thing being that this market hardening will be driven not by natural catastrophies but by events external to the insurance industry (financial sector meltdown, one of the biggest casulties of which has been market leader AIG). CGL trades barely above book value and should see impressive returns next year. Moreover it has a healthy dividend. Who'd have thought such a dull sector would be a buy???
I recall that Catlin said in mid October that (like Amlin and Omega) it would suffer big losses ($200m or so) from Gustav and Ike, and a further $100m+ from falling stock market valuations, which explains the share price crashing down to 270p or so at that time. Since then, the price has come back to 350p which suggests that the market is pricing in some positive developments. To be clear, your thesis is that, because AIG is such bad shape, this will reduce capacity in the market and rates will harden? Makes sense. It does looks rather cheap on a P/E basis but my problem with this sector is the catastrophe risk - something just comes out of nowhere and just wallops the share price.
