NEW YORK – Hurricanes almost always set off an orchestrated dance on Wall Street before they make landfall, with shares of property and casualty insurance companies dumped in favor of companies that sell construction supplies or portable generators.
Forecasting where a hurricane will hit and with what force is tricky, and there is a long history of false alarms. But the likelihood that Hurricane Florence will collide with Carolinas and neighboring states has created a sustained sell-off.
Allstate Corp. had been in decline for three days, as has Travelers Cos., though those shares appeared to stabilize Tuesday.
Property and casualty insurance investors “are still keenly aware of significant losses from Hurricanes Harvey, Irma and Maria in 2017,” wrote Kai Pan and Michael Phillips, analysts with Morgan Stanley.
Allstate has a 6.9 percent market share for home, auto and commercial property coverage in the Carolinas and Virginia, according to Morgan Stanley. Berkshire Hathaway has a market share of 5.6 percent, and Travelers is 4.3 percent.
Karen Clark & Co., which produces models for catastrophes, said that if 1989's Hurricane Hugo had hit South Carolina in 2012, just 23 years later, insurance losses would have more than doubled to $10 billion.
Insurers, of course, have built up war chests and insured their own potential losses given the severity of the storms that have been striking the coastal United States. Pan and Phillips point out that even with losses exceeding $140 billion last year, the insurance industry remains well capitalized.
How to put a price on the destruction and how those companies will secure funding going forward is a topic of discussion this week at the annual, global reinsurance conference in Monte Carlo, where the analysts are in attendance.
North Carolina has the highest property and casualty insured premiums of the three states at $16 billion, followed by Virginia at $13.6 billion and South Carolina at $9.5 billion, according to Citi.
“In North Carolina, we estimate Travelers losses would be about $42 million for each $1 billion in insured losses, followed by Allstate at $37 million, Chubb at $25 million and Progressive at $21 million,” wrote Citi analyst James Naklicki.
On the other hand, companies that help people ride out a storm, or clean up afterward, are having an exceptional week.
Shares of Generac Holdings Inc., which sells generators, are up almost 8 percent in just the past week. Shares of Home Depot Inc. and Lowe's Cos. are both up more than 3 percent in the same period.