Shares of Heritage Insurance rallied over 21 percent higher on Monday after initial reports from Florida revealed less damage from Hurricane Irma than anticipated.
The Clearwater, Florida-based insurer led a pack of local, small industry stocks higher earlier in the day, including moves 12 percent or more upward by shares of HCI Group based in Tampa, Universal Insurance in Fort Lauderdale, Federated National in Sunrise and Blue Capital Reinsurance in Pembroke, Bermuda.
"Hurricane Irma was tough, but it looks like it wasn't as bad as some expected," said Randy Frederick, vice president of trading and derivatives at Charles Schwab. "Towards the close on Friday, you saw a bit of a sell-off as ... people braced for the worst."
Shares of reinsurers surged, as the companies could have been on the hook if damage to Florida were severe. Hamilton, Bermuda-based Aspen Insurance rose 9.4 percent, and Everest Re rose 4.3 percent on Monday. The Standard & Poor's 500 closed 1.08 percent higher for the day, at 2488.11, a record.
"We think Hurricane Irma could be a top 5 most costly hurricane in the U.S, although the losses could be in-line-to-lower than market expectations," JPMorgan analyst Sarah DeWitt wrote in a note to clients Monday.
DeWitt forecasts the combined losses for the insurance industry in the third quarter for hurricanes Irma and Harvey will be in the $35 billion to $80 billion range, which actually bodes well for the sector's share prices.
"Our sense is losses could be at the lower end of the range as the storm weakened faster than expected," DeWitt wrote.
Stock prices of home insurers tied to Florida plunged Tuesday after Irma strengthened into a Category 5 storm. Investors feared historic damage with Irma charting a possible path towards Florida's east coast as the strongest hurricane on record in the Atlantic basin.
National insurance giants Progressive and Travelers saw shares closed up 2.2 percent and 2.3 percent, respectively, on Monday.
WATCH: S&P insurance index slide to continue
