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Florida insurers tumbling on fears of hurricane Irma damage
[SEATTLE] A group of insurers with a large presence in Florida plunged on Thursday, as Hurricane Irma continued on a collision course with Miami after battering Puerto Rico and devastating a chain of small Caribbean islands.
Universal Insurance Holdings Inc, the largest residential-property insurer in the state, sank 14 per cent at 3.27 pm in New York. Heritage Insurance Holdings Inc, Federated National Holding Co.and HCI Group Inc all extended their declines from earlier this week.
The regional players owe their position in the market, in part, to a costly spate of hurricanes in 2004 and 2005. Losses from those storms convinced national carriers like Allstate Corp. and State Farm Mutual Automobile Insurance Co to retreat from coastal regions, giving smaller firms an opportunity to gain share. More recently, Florida's state-run Citizens Property Insurance raised prices in an effort to shrink and reduce the risk to taxpayers.
The chances that Irma will make a direct hit on Florida Sunday continue to increase, according to the US National Hurricane Center, which posted hurricane and storm-surge watches for the peninsula and Florida Keys. The storm has already damaged or destroyed about 95 per cent of homes on the small island of Barbuda, crippled its airport runway and broke a cellular tower in two. There was massive damage on two French West Indies islands where eight people were killed.
Analysts have cautioned that the sell-off in the stocks is often overdone before big storms. The companies buy a form of backstop protection, called reinsurance, which will help pay for claims from a major storm.