how will hurricane irene affect on insurance stocks

how will hurricane irene affect on insurance stocks ; As Hurricane Irene barrels toward the East Coast, there is a lot of discussion about what the impact will be on insurance stocks. There are some names that will be in the eye of the storm and have potentially the greatest exposure.



In the property and casualty (P&C) sector, these include: Allstate (ALL), Travelers (TRV) and Chubb (CB) with, in descending order, an estimated $800 million, $600 million and $400 million for a $1.8 billion of the estimated $4 billion insurance cost. In the reinsurance (RE) sector, names include Arch Capital (ACGL) Aspen (AHL) and Transatlantic (TRH), all with about $300 million in estimated exposure. The economic cost is estimated at around $13 billion, which will place as the second (albeit distant) costliest storm in U.S. histo.



Sell Any Volatile or Risky Positions Today: If the hurricane disrupts infrastructure significantly — including urban areas losing power for long periods, ports and airports crippled or other damages — the market could see a sharp move down Monday when it digests a weekend’s worth of bad news in one day. Again, long-term investors who buy and hold shouldn’t sweat a few days of volatility. But if you have a risky play or a trade you need to close out soon, it might be prudent to exit that position today before the market closes to be on the safe side.



Sell Insurance Stocks: If you own Allstate (NYSE:ALL) or Travelers (NYSE:TRV) and are planning on holding the insurers for years to come, there’s no need to panic. But if you are trading these stocks or looking to exit a position in the next year or so, today might be the day to sell. That’s because insurers are prepping for up to $11 billion in damages from Hurricane Irene. Yes, that’s nowhere near the nearly $44 billion in estimated claims after the havoc wreaked by Hurricane Katrina. But it’s a huge chunk of change.



There’s talk of insurers raising prices in the wake of the hurricane to cover costs, but that won’t change the fact that premiums won’t come close to liabilities paid in the weeks ahead if things are as bad as some say. Allstate and Travelers have significantly underperformed the market in the last week as Irene has gathered steam, with TRV losing almost 4% as of the closing bell Thursday despite a 1.4% gain for the Dow since last Friday, while Allstate stock is flat. And as with the previous mention of a broad sell-off as the market prices in a whole weekend’s worth of bad news on Monday after the opening bell, it could get ugly even for mega-cap insurers like Allstate and Travelers with decent dividends.