Do Insurance Stocks Drop After a Hurricane Hits the US

Hurricanes can have a devastating impact on communities, causing widespread destruction and loss of life. After a hurricane hits the US, insurance stocks can drop significantly.

In the aftermath of Hurricane Katrina in 2005, the shares of insurance companies such as State Farm and Allstate plummeted by as much as 20%. This was largely due to the massive losses these companies incurred as a result of the storm.

Investors tend to sell off insurance stocks after a hurricane because they fear the financial impact of the disaster will be too great for the companies to recover from. This can lead to a sharp decline in stock prices.

The severity of the hurricane and the extent of the damage it causes can also influence the stock price drop. For example, Hurricane Harvey in 2017 caused an estimated $125 billion in damages, leading to a significant drop in insurance stocks.

Insurance stocks tanked on Monday after Hurricane Milton intensified into a category 4 storm on its path towards Florida's western coast.

The S&P Insurance Select Industry index was last down 3.1% on Monday, with Heritage Insurance, which has a big footprint in the state, down 25 percent.

Sector bellwether Travelers Companies was last down 4 percent, while Allstate and Assurant declined 5 percent and 4.4 percent, respectively.

Generac, which makes generators that power homes during an outage, surged more than 8 percent on Monday as investors bet on increased demand arising from the hurricane-related disruptions.

The full extent of hurricane season damage is still unknown, and analysts say that severe and frequent natural disasters have exacerbated the industry's retreat from high-risk areas, particularly Florida.

The costs of reinsurance have also risen sharply in the state, making it more expensive for insurers to operate.

Investors are worried about the long-term affect weather change and a seasonal uptick in damage will do to the business, said Michael Ashley Schulman, partner and CIO at Running Point Capital Advisors.

Florida was preparing for the largest evacuation since 2017 as Milton intensified in the Gulf of Mexico on its path toward its western coast, coming on the heels of the devastating Hurricane Helene.

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US property and casualty insurers' stocks tend to slump after a hurricane hits the US.

The industry has been grappling with multiple major hurricanes in 2024, including Hurricane Debby, Hurricane Francine, and Hurricane Helene, which have significantly hurt profits due to substantial payouts tied to widespread property damage, business interruptions, and liability claims.

The S&P Insurance Select Industry index was last down 2.44% on Monday after Hurricane Milton intensified into a category 4 storm on its path towards Florida's western coast.

Severe and frequent natural disasters have exacerbated the industry's retreat from high-risk areas, particularly Florida, making it more expensive for insurers to operate.

The costs of reinsurance have also risen sharply in the state, affecting insurers' long-term revenue models if extreme weather drives people away.

Investors are thinking about the short-term hit to earnings, as well as the long-term effect weather change and a seasonal uptick in damage will do to the business.

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Heritage Insurance, Universal Insurance, and HCI Group were last down 27%, 14%, and 16%, respectively, after Hurricane Milton intensified.

Travelers Companies, Allstate, and Assurant declined 3%, 3.3%, and 4%, respectively, on Monday.

Generac, which makes generators that power homes during an outage, surged more than 8% on Monday as investors bet on increased demand arising from the hurricane-related disruptions.