Insurance stocks and sector-related ETFs jumped Monday after damages from Hurricane Irma appeared less grave than previously expected.
On Monday, the SPDR S&P Insurance ETF (NYSEArca: KIE) rose 2.4%, iShares US Insurance ETF (NYSEArca: IAK) gained 2.1% and PowerShares KBW Property & Casualty Insurance Portfolio (NYSEArca: KBWP) increased 3.5%, bouncing back above their short-term, 50-day simple moving average.
In the wake of Irma, Morgan Stanley advised investors to own P&C brokers and large diversified companies.
“P&C brokers are better positioned as they do not take underwriting risks and could benefit from improving P&C pricing. Large diversified primary insurers have strong balance sheets and reinsurance protection to weather the losses,” Morgan Stanley said, according to MarketWatch.
The insurance ETFs plunged in the wake of Hurricane Harvey and again ahead of Irma on expectations that insurance companies will also be flooded with damage claims. However, damage estimates now indicate the cost of insurance will be far less than was feared.
AIR Worldwide, a catastrophe-modeling firm that is closely watched by the insurance industry after a major disaster, estimated private-sector insured losses in the U.S. would only amount to $20 billion to $40 billion, or well below the projected $100 billion some firms announced on Friday, reports Erik Holm for the Wall Street Journal.