Insurers are confident they will not face a flood of Millennium Bug-related claims from policyholders, leading some investors to snap up shares in the leading firms while they are cheap.
Stocks in the insurance sector have suffered from worries that the industry will end up shelling out millions of pounds as machinery and computers malfunction during the 2000 date-change period. But some brokers now think the sell-off has been overdone and are advising clients to buy into the sector.
Mr Jeremy Batstone, head of research at NatWest Stockbrokers, said: "There are some real bargains out there. Y2K is a formidable event, but if it makes no big impact insurers might all rebound very strongly."
He suggested CGU, formed from the merger of Commercial Union and General Accident, was "a very, very high-quality business", representing a good buying opportunity for people looking for a place to invest.
Goldman Sachs analyst Mr Richard Burden agreed CGU was a good buy and also recently named Royal & Sun Alliance as a recommended stock. Royal & Sun has already seen its shares soar in the lead up to the new year on hopes of a takeover bid by Anglo-Swiss insurance group, Zurich.
A spokesman for the Association of British Insurers said: "There should not be a flood of claims because by and large millennium problems are not covered by policies." As a general rule, insurers will not pay for equipment directly damaged by the bug, such as a video recorder or heating thermostat, but will cover subsequent damage caused, like a resulting fire.
