Loss-hit insurers shares plummet but brokers should benefit

Shares in insurers and reinsurers with a high market share in Texas have been hit in the aftermath of Hurricane Harvey and the subsequent flooding in the region though analysts have also noted that re/insurers’ share prices can recover strongly in the three to six months after an event.

Shares in Travelers fell by almost 3 percent in Monday while other insurers that write business in the state also saw their share price fall by between 1 and 2 percent. These included Hartford Financial Services Group, Allstate Corp, Progressive Corp.

Meanwhile several reinsurers including Axis Capital, Everest Re, RenaissanceRe and XL Group also saw their share price fall.

But Morgan Stanley suggested that while carrier stocks tend to underperform immediately following a major cat (given loss uncertainty), they can also outperform the overall market 3-6 months after as loss estimates come in focus and rates stabilize.

“Insurance brokers, on the other hand, tend to outperform immediately following an event (given the expected rise in rates with no underwriting risk),” the bank said in a research note.

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