To prep for Florence, investors sell insurers

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. That routine began a week ago, though Hurricane Florence appears to be turning up the volume this time.

The last time a hurricane of this size struck the middle of the East Coast, Texas Instruments had just introduced the first transistor radio. Since then, the region has been developed heavily and the potential damages may be exponentially higher. 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.

Forecasting where a hurricane will hit and with what level force is always 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 of major property and casualty insurance companies, and the companies that insure the insurers. 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. “We expect Florence to weigh on (property and casualty) insurance stocks as it moves closer to mainland U.S.”