Hurricane Earl may open new markets for the Hurricane Hot List, BUGS,FUEL, BCON, GV, Cat Bonds

Hurricane Earl bore down on North Carolina with winds of 140 miles (225 kilometers) per hour, prompting coastal evacuations and emergency declarations, while storm warnings were issued in Bermuda as Tropical Storm Fiona advanced.

Earl is the third-strongest hurricane ever to travel so far north along the East Coast, Weather Underground co-founder Jeff Masters said today in his blog. Its winds are just 5 mph below the strength of the 1955 and 1961 storms that hold the record, he said.

Hurricane warnings are in effect from Bogue Inlet, North Carolina, to the Virginia line and from Westport, Massachusetts, to Hull, including Martha’s Vineyard and Nantucket Island, the National Hurricane Center said in its 11 a.m. advisory.

President Barack Obama and North Carolina Governor Bev Perdue both declared a state of emergency for that state, and Governor Bob McDonnell also declared one in neighboring Virginia. Dare, Currituck and Hyde counties in North Carolina said their schools would close today. Evacuations were ordered for Hatteras and Ocracoke islands in the Outer Banks yesterday.

Hurricane-force winds are forecast to hit North Carolina tonight as Earl passes near the Outer Banks before scraping Cape Cod and striking Nova Scotia at the weekend. Meteorologists warned that New York City may be hit by winds of at least 39 mph.

“On the track that we’re forecasting, there will be a significant impact to the Outer Banks,” Todd Kimberlain, a hurricane specialist at the center, said today in a telephone interview. “They have less than 24 hours before the arrival of hurricane conditions. There isn’t a whole lot more time, and conditions are going to deteriorate throughout the day.”

Moving North

Earl was 300 miles south of Cape Hatteras moving north at 18 mph, the National Hurricane Center said. The storm’s winds, already the strongest of the Atlantic season, accelerated from 140 mph yesterday.

“It wouldn’t take much of a deviation for the core of the hurricane to be very close to Martha’s Vineyard, Nantucket and maybe even Cape Cod,” Kimberlain said.

The hurricane is expected to pass about 50 miles from Nantucket, according to the National Weather Service website.

Tom and Veronica Weber, of New York’s Long Island, left Kitty Hawk, North Carolina, today, cutting short a week’s vacation to comply with a mandatory evacuation order on the Outer Banks. Traveling with two children and another relative, the couple plans to drive nine hours in hopes of beating Earl to New York.

Moving Out

“I don’t want to get hit by the hurricane twice,” said Tom Weber, 40, as he packed luggage. “I would rather ride it out at home.”

Obama’s emergency declaration extends to 18 counties and allows the Federal Emergency Management Agency to mobilize rescue and cleanup equipment and provide federal aid, according to a statement e-mailed today by FEMA.

About 1.8 million people in Virginia and North Carolina may be affected by hurricane- or tropical storm-force winds ahead of the U.S. Labor Day holiday weekend, according to the U.S. Census Bureau.

Earl may come ashore near Yarmouth, Nova Scotia, about 185 miles west of Halifax, on the morning of Sept. 4, the tracking map of the Canadian Hurricane Centre showed. Yarmouth, with about 7,200 residents, is at the center of Canada’s lobster fishing grounds.

Further out to sea, Tropical Storm Fiona, with 50 mph winds, headed toward Bermuda and is expected to pass close to the island nation sometime in the next two days. Fiona was 550 miles south of Bermuda, moving north-northwest at 17 mph, the Hurricane Center said before 11 a.m. Miami time.

Behind Fiona, Gaston, which was downgraded to a tropical depression, was about 970 miles west of the Cape Verde islands moving west at 7 mph, the center said at 9 a.m. Miami time. The storm had maximum sustained winds of 35 mph.

In 2005 FUEL hit $20, GV was $1, BCON hit $4 All have the potential to return to those levels.

U.S. Microbics, Inc. (Public, OTC:BUGS)

U.S. Microbics Inc. is a business development and holding company that acquires, develops, and deploys environmental technologies for remediation of contaminated soil and groundwater; reduction of air and water pollution; reactivation of carbon-filtration systems, and microbial-based approaches to agriculture enhancement. The Company provides engineering solutions to reduce pollution, improve water quality, and increase agricultural output. U.S. Microbics, Inc., along with its subsidiaries provides products and services, which include Environmental Remediation Services, which helps in the assessment, remediation planning, and/or operation of remediation sites, and Microbial Remediation Expertise, which focuses on licensing, training, and transfer of know-how to government and non-government agencies, as well as to the private sector for reducing pollution, improving water quality, and enhancing crop yield.

SMF Energy Corporations (NASDAQ:FUEL)

SMF Energy Corporation (SMF) is a provider of petroleum product distribution services, transportation logistics and emergency response services to the trucking, manufacturing, construction, shipping, utility, energy, chemical, telecommunication and government services industries. It provides services and products through 31 service locations in the eleven states of Alabama, California, Florida, Georgia, Louisiana, Mississippi, Nevada, North Carolina, South Carolina, Tennessee and Texas. The range of services offered to its customers includes commercial mobile and bulk fueling; the packaging, distribution and sale of lubricants; integrated out-sourced fuel management; transportation logistics and emergency response services.

The Goldfield Corporation (AMEX:GV)

The Goldfield Corporation is engaged in electrical construction, including the placement of fiber optic cable, and real estate development. The Company’s customers include Florida Power & Light Company, M & A Electric Power Cooperative, Duke Energy Corporation, Georgia Transmission Corporation, Orlando Utilities Commission, Central Electric Power Cooperative, AT&T, City of Vero Beach, Florida, Kissimmee Utilities Authority and Santee Cooper (South Carolina Public Service Authority). The Company operates in two sectors: Electrical Construction and Real Estate. Through the Company’s subsidiary, Southeast Power Corporation (Southeast Power), it is engaged in the construction and maintenance of electrical facilities for utilities and industrial customers. Through the Company’s subsidiary Bayswater Development Corporation and its various subsidiaries (Bayswater), it is engaged in the acquisition, development, management, and disposition of land and improved properties.

Beacon Power Corp. (NASDAQ:BCON)

Beacon Power Corporation is a development stage company. The Company along with its subsidiaries, designs, manufactures and operates flywheel-based energy storage systems. The focus of its research and development has been to establish flywheel-based energy storage technologies that can provide energy solutions for the worldwide electricity grid.

Cat Bonds

Insurers are issuing catastrophe bonds again to complement traditional and cheaper reinsurance and to spread the risks in buying protection against events that could cost them tens of billions of dollars in claims.

The nascent cat bond market froze for several months after the late 2008 collapse of investment bank Lehman Brothers, which had played a counterparty role in several of the early bonds.

But already this year 12 new cat bonds have been issued, transferring risks associated with natural disasters to capital market investors rather than traditional reinsurers.

A hurricane or earthquake can wipe out profits across the traditional insurance and reinsurance market, often driving up prices for cover and limiting the amount available for insuring against certain perils. Hurricane Katrina, the industry’s most costly natural disaster, cost $40 billion in claims.

“Cat bonds help to diversify our group protection capacity and supplement traditional reinsurance — especially for peak risk, such as European wind and U.S. perils like hurricane and quake,” said Georg Rindermann, senior project manager at Allianz(ALVG.DE).

Allianz is one of seven primary insurers that have issued cat bonds this year rather than relying solely on the reinsurance industry. The others are USAA, Assurant(AIZ.N), Nationwide MutualNMUIC.UL, State Farm, The Hartford and first time issuer Chartis.

Reinsurance companies, such as Munich Re and Swiss Re, also issue cat bonds to transfer major risks and thus free up capital to underwrite new business. They initially dominated issuance, but this year they have lagged primary insurers, issuing just five cat bonds so far.

Swiss Re issued two of these to cover against extreme mortality, Atlantic hurricane, European windstorm, California and Japan earthquake, while Munich Re issued the other three, against U.S. hurricane and European windstorm.

Catastrophe bonds are no longer seen as standalone transactions to cover peak natural perils, say market participants in the Insurance-Linked Securities (ILS) sector.

Just as a prudent corporation would not finance their company only from the banking sector, insurers are using the bonds to diversify their sourcing of reinsurance, said Chi Hum, global head of distribution at GC Securities, part of reinsurance broker Guy Carpenter.

“From a risk management perspective, primary companies cannot afford to be exposed to the reinsurance cycle,” he said.

QUAKE AND WINDSTORM

The bonds also tie in the pricing for the duration of the maturity and protect the insurer against the reinsurance industry’s reaction to major loss events.

“There is … the risk that if a cat event were large enough, there could be a strain on the claims paying ability of some reinsurers,” said Gary Martucci, director at Standard & Poor’s Insurance Ratings.

Prices the reinsurance industry can charge primary insurers in premiums to cover their risks have not increased, but may do so after a significant natural catastrophe — for example, property and casualty reinsurance rates after Katrina in 2005.

Allianz issued the third bond in its catastrophe reinsurance program, Blue Fin Ltd, in May to protect itself against $150 million of U.S hurricane and European windstorm.

The reinsurance industry has already been exposed to extreme events this year — even before the start of the U.S. hurricane season on June 1, which is predicted to be more severe than average.

Private weather forecaster Commodity Weather Group raised its 2010 Atlantic hurricane forecast to 15 named storms, of which nine will become hurricanes and four become major category 3 or higher.

Loss claims such as those from the Chile quake, European windstorm Xynthia and flooding in Eastern Europe in the first half of the year are already above the long-term average, pressuring profits at a range of insurance companies.

Swiss Re and Munich Re both upped their Chile quake losses from initial estimates of claims. The Feb. 27 earthquake killed nearly 350 people and was the fifth-strongest since worldwide records began in 1900.

Access to the insurance-linked market has become a core strategy in supplementing traditional reinsurance, but cat bonds still need to prove their value over the market cycle, say insurers.

“Prices must be aligned between reinsurance and cat bonds, otherwise the market cannot evolve,” said Allianz’s Rindermann, saying the test will come when a sizeable cat event triggers a significant amount of bonds.

“The cat bond market must be reliable and available in both pre and post event situations; otherwise you cannot rely on it,” he said, adding that when this event does occur, new bonds would need to be issued and investors must be still available at prices that are comparable to reinsurance.

Remeber, Take your profits, if there is dilution hit the sell button.

Posted by Shayne Heffernan on Sep 2nd, 2010and filed underEquities, Latest News, Markets, The Hot List.You can follow any responses to this entry through theRSS 2.0You can leave a response by filling following comment form or trackback to this entry from your site