Piper analysts say Hurricane Milton could change the insurance market via Investing.com

Investing.com — Hurricane Milton, while its full impact is still uncertain, has the potential to change the insurance market, according to Piper Sandler analysts.

The firm said in a note on Tuesday that it was too early to accurately estimate total losses, but expected substantial personal, economic and insured damage from the storm.

Piper Sandler points out that Milton could become one of the biggest catastrophic events.

“Uncertainty is likely to continue to drive down exposure stocks until insured losses are better understood,” the firm wrote.

Analysts point out that insured damage from a hurricane comes from a combination of factors, such as where the storm hits, its strength and the nature of the damage.

Wind damage is usually covered by private insurers, while flood damage is largely handled by the US government.

“The costliest hurricane to primarily hit Florida was Hurricane Ian, which caused approximately $56 billion in insured losses,” the analysts said. “Florida is probably prepared, so we can hope that few people will be hurt, but more people have moved to coastal Florida in recent years, so the insured damages could be higher than the last time there was a such event”.

Piper Sandler notes that historically, insurance stocks tend to decline as hurricanes approach landfall, but rebound once the full extent of insured losses becomes clearer.

They add that the insurance industry often responds to large events by increasing premiums, tightening terms and reducing availability, which can be economically positive for the sector in the long term.

However, smaller insurers with inadequate reinsurance coverage may face greater risks.

Piper Sandler identifies several companies that could be most affected, including Allstate (NYSE: ), American International Group (NYSE: ), Chubb (NYSE: ), Heritage Insurance, Progressive and Universal Insurance Holdings (NYSE: ), all of which have exposure weather disasters in Florida.

According to analysts, “for an event as large as Milton, there will be few insurers without losses.”