Billions of dollars have been wiped off the value of Bermudian-based insurers and reinsurers as concern grows about the potential impact of Hurricane Irma.

Yesterday was the worst day for insurance stocks collectively in 2017 as the scale of the losses from Hurricane Harvey in Texas and the potential damage from Irma, the strongest Atlantic Ocean hurricane on record, sent share prices tumbling.

Bermudian-based companies saw sharp declines in the value of their stocks, many falling between 4 per cent and 10 per cent.

Maiden Holdings plunged 10.27 per cent, Aspen Insurance dropped 9.36 per cent, Validus Holdings was down 8.82 per cent, Axis Capital fell 7.45 per cent and RenaissanceRe dropped 7.14 per cent.

The collective market capitalisation of those five companies alone was, as a consequence, shaved by more than $1 billion.

Meanwhile shares of XL, Argo, Everest Re, and Blue Capital Reinsurance were all between 5 per cent and 7 per cent lower. Smaller declines were recorded by other insurers and reinsurers.

The mounting insured losses from Harvey, which tore through coastal areas of Texas last month bringing devastating flooding to a wide area, including Houston, is part of the reason for the falling value of insurance sector stocks.

But added to this is the fear of what damage Irma might cause to densely populated areas of Florida should it strike the state as it tracks west across the northern Caribbean. It is a Category 5 hurricane packing winds of 175 miles per hour, and some analysts are predicting it could be the most costly hurricane in US history, beating the record of Hurricane Katrina in 2005.

Anguilla, Turks and Caicos, and northern Cuba are currently projected to be hit by Irma.

Jay Gelb, of Barclays, in a research note, wrote: “Given the potential magnitude of this storm as well as the potential to impact a highly populated area, we think Irma’s insured damage in Florida could be the largest ever in the US perhaps equivalent to Hurricane Katrina.”

Katrina’s insured damage was $50 billion adjusted for inflation. Mr Gelb’s note were reported by CNBC.

“We would view Irma as more of a risk to the traditional reinsurers as well as third-party providers of reinsurance capital,” noted Mr Gelb. “Of the companies we cover, reinsurers expected to have among the largest exposures to a Florida hurricane could include Everest Group.”

He added: “From the insurance industry’s perspective, we would expect a substantial hurricane possibly impacting Florida as well as just after Hurricane Harvey to possibly halt further reinsurance price declines for the first time in many years.

“However, insurers’ earnings and book values would also be expected to suffer a large hit.”

Meanwhile, the pressure on global property casualty reinsurers, including the prolonged depressed pricing environment, will mean only those strong enough to adapt or evolve will survive, according to S&P Global Ratings.

In a report yesterday it noted: “Strong enterprise risk management, disciplined underwriting thus far, and robust capital adequacy have helped most reinsurers withstand competitive pressures. However, reinsurance pricing has continued its downward trajectory, constantly testing the sector’s wherewithal, with expected decreases of zero per cent to five per cent into 2018.”

Taoufik Gharib, S&P Global Ratings credit analyst, said: “We forecast the global P/C reinsurance industry’s operating performance deteriorating with a combined ratio of 96 per cent to 100 per cent and return on equity of 6 per cent to 8 per cent in 2017.”

He said conditions have made mergers and acquisitions a viable option for some reinsurers to stay relevant, but warned it is not a cure-all.

Mr Gharib added: “If reinsurers’ profitability falls sustainably below their cost of capital, we will likely revise our outlook on the sector to negative.”