US property and casualty insurers slump as hurricane season brings losses

By Manya Saini

(Reuters) – U.S. property and casualty insurance stocks tanked on Monday after Hurricane Milton intensified into a category 4 on its path toward Florida’s western coast, marking yet another costly disaster for the industry to cover this year.

Insurers are expected to face catastrophe-related claims for billions of dollars from a devastating hurricane season. Catastrophe losses refer to a significant financial hit that insurance companies incur due to large-scale natural or man-made disasters.

These events have been elevated over the past few years and have significantly hurt profits due to substantial payouts tied to widespread property damage, business interruptions and liability claims.

The U.S. has already grappled with multiple major hurricanes in 2024 including Hurricane Debby striking Florida in August, Francine which made landfall in Louisiana in September, and more recently Hurricane Helene that hit Florida in the same month.

The S&P Insurance Select Industry index was last down 2.44% on Monday.

MOUNTING LOSSES

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 not only thinking about the short-term hit to earnings but also 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.

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

On Monday, 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. It had the potential to affect areas already wrecked by Helene.

Heritage Insurance, which has a big footprint in the state, was last down 27%. Universal Insurance, and HCI Group, fell 14% and 16%, respectively.

Insurance broker Aon (NYSE:) in a report late on Sunday said that while its too early to gauge the exact magnitude and location of the greatest impacts, 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.

Sector bellwether Travelers Companies (NYSE:) was last down 3%, while Allstate (NYSE:) and Assurant (NYSE:) declined 3.3% and 4%.