Although bad weather is not a novel occurrence, the proliferation of superstorms has heated up only in the past 20 years. Up until 1992, commercial insurance was widely available at affordable rates. Utilities paid a reasonable premium, and could rest easy as hurricane season rolled around. But Hurricane Andrew was the final straw for insurers. Storms were becoming bigger, more random, and (most importantly) much more expensive. Insurers pushed premiums through the roof, and utilities were left without a safety net.
Storms and hurricanes are unavoidable costs for utilities. What investors need to understand is how each company is ready to address those costs after a Katrina, Irene, or Sandy take their toll. 8.5 million people had no power at the peak of Sandy's temper tantrum, but the effects of this storm will be felt for years to come. For prepared utilities, costs will be controlled. For those burying Sandy's impact in their books – don't expect to see sunshine on the next pages of your portfolio.
Source: Motley Fool
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