It's too soon to tell how Hurricane Matthew may affect U.S. insurers' bottom lines, since the precise path of the storm and its strength at landfall are key factors in the extent of the damage.
"Whether you think it's going to be a big event can literally change minute by minute, hour by hour," analyst Paul Newsome of Sandler O'Neill said by phone Wednesday. "Hurricanes are unpredictable."
While the storm, which is currently pounding the Caribbean and will likely hit Florida late today or early Thursday, may influence trading beforehand, a sell-off likely wouldn't take place until afterward -- if then. The probability of a catastrophic event is always priced into a homeowners insurance stock like AIG (AIG - Get Report) or Traveler's (TRV - Get Report) , Brett Horn of Morningstar said by phone Wednesday.
Matthew currently has winds of 120 miles per hour, making it at Category 3 storm, and it's expected to strengthen somewhat during the next few days, according to the National Hurricane Center. The winds of a Category 3 storm are generally strong enough to cause major damage to well built homes, blowing off portions of roofs and uprooting trees.
"Anybody who has a big presence in homeowners is going to be the most exposed," he noted. But "even if there's losses I don't think you're going to see a material reaction in the market."
"A lot of investors have this view that you wait for a big catastrophe, the industry takes a big hit, that potentially opens up buying opportunities," Horn said.
But if the storm come ashore in Florida, many of the big insurance companies won't take a hit at all.
"Florida has become a bit of a different state from a market-share perspective, and that makes it a bit more complicated," Newsome said
The state has unusually high exposure to hurricanes, and after a series of several storms, Newsome said large companies like Allstate (ALL - Get Report) and Travelers (TRV - Get Report) tried to raise the rates of homeowners' policies by forming Florida-only subsidiaries.
When Florida's government declared the practice illegal, big insurers pulled out, which made space for smaller companies.
"The big companies haven't gone back, and new companies have taken back the market share," Newsome said. "That hasn't happened in other states."
If states such as South Carolina or Georgia are hit, however, companies like Allstate (ALL - Get Report) , Chubb (CB - Get Report) , Travelers, AIG and MetLife (MET - Get Report) would likely feel the biggest squeeze. Those companies were all trading up Wednesday.
Most of the companies who stand to take a hit have more than enough capital to handle such an event. One case in which the companies struggled? Superstorm Sandy, which struck the Northeast in 2012.
"The industry took losses on Sandy," Horn said. "Most of the damage related to Sandy was flooding, which is generally covered under the government policies."
How much insurers have to pay out generally demands on the hurricane's path. If storms remain farther offshore, like Sandy, most damage may come from flooding, which is covered under government policies. If the storm moves inland, damage would probably be caused by wind, which would be covered by homeowner's insurance.