Insurance and reinsurance stocks with large exposure to the South Florida property market are experiencing a bit of a relief rally on Wednesday after logging their worst day of the year to start the holiday-shortened week.
As Hurricane Irma inches closer to a potential U.S. landfall, the fate of these stocks will likely remain closely tied to the latest weather forecasts.
South Florida insurers HCI Group Inc HCI 3.04% and Universal Insurance Holdings, Inc. UVE 4.17% bounced 3 and 5 percent, respectively on Wednesday morning, while Heritage Insurance Holdings Inc HRTG 4.26% got a 9 percent bump.
Reinsurance stocks Everest Re Group Ltd RE 0.46% and XL Group Ltd. XL 1.14% aren’t getting nearly as much love from the market, trading up less than 1 percent each on a strong day for U.S. stocks. While insurance companies may be on the hook for billions of dollars in payouts if Irma’s landfall is a worst-case scenario, the insurance companies rely on reinsurance companies for their own insurance, insulating the insurance companies from shouldering the entire burden.
The latest models call for Irma to make landfall near Miami on Sunday and track along Florida’s east coast, although projections are very fluid this far in advance of landfall. Any signs of a direct hit on Miami or another heavily populated region of the state could send insurance and reinsurance stocks headed downward once again. At the same time, a near-miss from Irma in Florida would likely send these stocks right back to where they were before the Irma scare.
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