Irene and Insurers: Less Damage, Excuse to Hike Prices
"Following $70b+ in global catastrophe losses (Australian floods, New Zealand quake, Japan quake/tsunami, US tornados in Joplin and Tuscaloosa) we never felt 'one more storm' was required to drive higher pricing in 2012," wrote Morgan Stanley's Gregory Locraft in a note to clients late Sunday. "Nonetheless, we believe Irene serves as that 'one more storm' for the doubters and the associated media focus became in effect a strong advertising campaign for the P&C industry. We expect higher prices and higher demand into 2012 across all property-related lines."

Locraft estimates insurers will face overall losses from Irene of less than $10 billion, based on early reports from risk-modeling firms used by the insurance industry. Total economic losses will likely be twice that, according to the analyst.

The worry over Irene kicked into high gear on Wednesday when the storm was still a Category 3 and various computer models showed a destructive patch up the Eastern seaboard, ultimately hitting New York city and Long Island. New York Mayor Michael Bloomberg ordered the first ever mandatory evacuationof low-lying areas and shut down the subway system on Saturday before the storm.

Morgan Stanley's favorite insurance stocks are RenaissanceRe, Travelers , ACE Limited , Axis Capital Holdings, and Chubb.

"Each has the balance sheet strength to pay Irene-related claimsand plenty of excess capital to drive organic growth in an improving P&C marketplace," wrote Locraft. "With shares at all-time valuation lows management can drive shareholder returns via buybacks and above market dividend yields."