Fund managers increased their weightings in insurance stocks the week before Japan was devastated by the recent earthquake, the Bank of America (BofA) Merrill Lynch’s latest global fund manager survey shows.
Insurance stocks plummeted immediately after the disaster in anticipation of massive claims from policyholders. Share prices partly recovered last week, despite uncertainty over Japan’s nuclear power plants.
Gary Baker, a European equity strategist and co-author of the monthly survey, says such events typically trigger a fall and a subsequent rise of insurance stocks.
“I don’t think it is all bad news for insurers,” Baker says. “Insurance rates often go up after major disasters as people become more aware of the dangers and take out insurance.”
Many fund managers had been underweight financials for some time and had only recently increased ex-posure to the insurance sector.
Overall, economists have noted that the earthquake will probably cause a temporary slowdown in Japan’s economy, the world’s third-largest, which could help to dampen soaring raw material prices and inflation.
Some 203 managers running $602 billion (£376 billion) in assets took part in the survey. It was conducted with the help of TNS, a market research firm, from March 4-10.