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U.S. citizens all along the East Coast aren’t the only ones knuckling down and preparing to weather the impending storm.
Major insurance companies, like so many of the customers they insure, are likely huddling and praying for minimal damage as the the aptly dubbed Frankenstorm begins to brew in states like New York, New Jersey, and Pennsylvania. Hurricane Sandy, which forced the first weather-related closure of all U.S. stock exchanges in 27 years Monday, has the dreaded potential of being the largest storm to ever hit the U.S. mainland.
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And all the damage expected to rain on the Eastern seaboard could bring crippling amounts of insurance claims with it, a fear investors might act upon once the stock markets reopen.
Insurers like AIG Financial Products (NYSE:AIG), Allstate (NYSE:ALL), Travelers (NYSE:TRV), and others are at risk of taking significant stock hits as the result of investor unease surrounding the effects Sandy could have on the companies. Hurricane Katrina, for example, which ravaged the Gulf Coast area in 2005 and racked up $105 billion in damages and 1,833 deaths, sent Allstate shares falling from $58.27 per share to $54.53 per share in the month following the destruction.
Although the extent of damage Sandy will cause is impossible to predict, U.S. stock-index futures and the international stock prices of some insurance companies have already begun to dip in anticipation of the increased payments the companies will stand to make if expensive claims skyrocket. Allstate shares traded down 0.6 percent in German markets.
“The market is factoring in the potential damage from the storm,” said Peter Jankovskis, co-chief investment officer for Oakbrook Investments. “It looks like it could be quite substantial. It’ll naturally have an impact on insurance companies but [also on] other companies by putting a crimp on sales in the areas affected by the storm.”
Allstate has homeowners insurance exposure of 13.8 percent to hurricane Sandy, and auto exposure of 15.5 percent. The Chubb Corporation (NYSE:CB) has 6.6 percent exposure for both its homeowners and commercial insurance units, and Travelers has 9.0 percent and 9.6 percent exposure in those respective categories.
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