Categories: Exchange Traded Funds (ETFs)Insurance

ETF Talk: Insurers Will Take a Big Hit from Hurricane Sandy

The devastating loss of life and property caused by Hurricane Sandy will be accompanied by billions of dollars in claims that insurers will need to pay. One exchange-traded fund (ETF) that is likely to absorb a big blow from the storm is the SPDR S&P Insurance ETF (KIE).

The SPDR S&P Insurance ETF is designed to provide investment results, before fees and expenses, that correspond generally to the total return of an index that tracks the performance of publicly traded insurance companies. In times of natural disaster, property and casualty insurers end up battered along with the various risks that are covered by their policies. As a result, the share prices of insurers typically fall in response to such calamities.

That recent dip is shown by the chart of KIE below.

The S&P Insurance Select Industry Index that KIE tracks is a modified equal-weighted index. That index is comprised of large insurance companies that are listed on the NYSE or on another U.S. exchange. The index includes representation of the insurance industry’s diverse sub-sectors, including personal and commercial lines, property/casualty insurance, life insurance, reinsurance, insurance brokerage and financial guarantee.

The fund actually had been having a good year until Hurricane Sandy knocked it down recently. Much like the people in the storm-ravaged sections of the United States that took the brunt of the high winds, flooding and other storm-related damage, the fund still will need a bit of time to recover.

If you had been thinking about including the insurance sector in your portfolio, there is no rush to do so now. Just wait until insurance stocks and the KIE fund stabilize as the exact financial fallout from the super-storm becomes known.

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Doug Fabian

Doug Fabian is the Editor of Weekly ETF Report, a free weekly e-newsletter, and the newsletter Successful ETF Investing. He’s also the host of the syndicated radio show, “Doug Fabian’s Wealth Strategies.” Doug also edits the fast-paced trading service ETF Trader’s Edge, for investors who want to take their profits to the next level. Taking over the reins from his dad, Dick Fabian, back in 1992, Doug has continued to uphold the reputation of the newsletter as the #1 risk-adjusted market timer as ranked by Hulbert’s Investment Digest. Doug became a member of the “SmartMoney 30” in 1999 — a listing of the most influential individuals in the mutual fund industry. In the feature, SmartMoney magazine exclaims that Doug is the best-known “trend follower” among the $56 billion (and growing) group of financial advisors. In 2001, Doug wrote “Maverick Investing,” published by McGraw-Hill. He also regularly appears at seminars around the country, stands out on the pages of the largest newspapers (The Wall Street Journal, The Los Angeles Times, and The New York Times), and speaks on national television (CNBC, Fox News, and Bloomberg Forum). For more than 35 years, Successful ETF Investing (formerly the Telephone Switch Newsletter and Successful Investing) has produced double-digit percentage annual gains. Doug has become known for his expert knowledge and timely use of innovative tools, such as exchange-traded funds, bear funds, and enhanced-index funds to profit in any market climate. For more information about Doug’s services, go to http://www.fabian.com/