Home/home insurance stocks fall on Hurricane Milton fears

U.S. property and casualty insurance stocks edged lower on Monday after Hurricane Milton intensified into a Category 4 storm on its way to Florida’s west coast, marking yet another costly disaster for the industry to cover this year.

Insurers are expected to face billions of dollars in catastrophe claims following a devastating hurricane season. Catastrophe losses refer to a significant financial impact that insurance companies bear due to large-scale natural or man-made disasters.

These events have intensified in recent years and have significantly impacted profits due to substantial payouts related to widespread property damage, business interruption and liability claims.

The US has experienced several major hurricanes in 2024, including Hurricane Debby that hit Florida in August, Hurricane Francine that hit Louisiana in September, and more recently Hurricane Helene that hit Florida in the same month.

The S&P Insurance Select Industry Index .SPSIINS fell 3.1% on Monday.

ASSEMBLY LOSSES

Severe and frequent natural disasters have exacerbated the withdrawal of industry from high-risk areas, particularly Florida. Reinsurance costs have risen sharply in the state as well, making insurers work harder.

“Investors are not just thinking about the short-term impact of earnings, but also the long-term impact of climate change and the damage a seasonal increase will do to the business,” said Michael Ashley Schulman, partner and CIO at Running Point Capital Advisors.

“Their credit ratings were largely unaffected in the short term; however, if extreme weather drives people away, their long-term income models may be affected,” Schulman said.

On Monday, Florida braced for its biggest evacuation of 2017 as Milton intensified in the Gulf of Mexico on its way to its west coast, coming in the wake of devastating Hurricane Helene. It had the potential to affect areas already destroyed by Helene.

Heritage Insurance HRTG.N, which has a large footprint in the state, last fell 25 percent. Universal Insurance UVE.N and HCI Group HCI.N fell 18 percent and 17 percent, respectively.

Top Travelers Companies TRV.N was last down 4 percent, while Allstate ALL.N and Assurant AIZ.N were down 5 percent and 4.4 percent, respectively.

Meanwhile, Generac GNRC.N, which makes generators that power homes during an outage, rose more than 8 percent on Monday as investors bet on increased demand stemming from hurricane-related disruptions.

Insurance broker Aon said in a report late Sunday that there is an increasing risk of life-threatening storm surge and damaging winds for portions of the west coast of the Florida peninsula beginning Tuesday night or early Wednesday.

The US hurricane season is expected to end on November 30. Forecasts indicated above-normal activity this year due to unusually warm sea surface temperatures in the tropical Atlantic coupled with La Nina weather patterns.

“The insurance industry needs to be prepared for the possibility of a challenging second half of the year,” broker Gallagher Re said in a July report.

“These conditions, in tandem with the influence of climate change, have contributed to more unpredictable and extreme events in 2024.”

Where Hurricane Milton is expected to hit https://reut.rs/3Yd4Azi

(Reporting by Manya Saini in Bengaluru; Additional reporting by Lance Tupper in New York; Editing by Vijay Kishore and Krishna Chandra Eluri)

TOPICS
Catastrophe Natural disasters Hurricane Property Property Accidental accident