Rising rates to boost Lancashire

Insurance companies were hit hard in 2011 from claims arising from a string of catastrophes – earthquakes in New Zealand and Japan; floods in Australia and Thailand. So investors may be inclined to sidestep their shares. But that would be to miss an opportunity. True, big claims are bad news for profits in the short term, but they also enable insurers to hike their premium rates in order to rebuild their reserves, which is good news for longer-term earnings. Lancashire wasn't hit nearly as hard by 2011's catastrophes as most rivals, so it looks especially well-placed to take advantage of that trend.

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