Generac saw its shares rise sharply after increased demand for generators due to Hurricane Milton, while insurance company shares fell on rising damage claims. A worker unloads a 24-kilowatt Generac home generator off a truck at Captain Electric in Orem, Utah, on Feb. 18, 2021.
Shares of backup power generation company Generac Holdings surged more than 7% on Monday as Hurricane Milton rapidly strengthened into a Category 5 storm.
Generac Stock Rises Amid Hurricane Milton
Meta Description: Generac saw its stock surge sharply after increased demand for generators due to Hurricane Milton, while insurance companies’ stocks fell due to increased damage claims.
After Hurricane Milton struck the southeastern coast of the United States, Generac, a company that makes electric generators, saw its stock surge significantly. Demand for electric generators soared in areas affected by the storm, where thousands of homes and businesses experienced power outages. Generac, which has been a leader in the generator industry, saw an immediate benefit from the event, while the insurance market faced significant pressure from soaring damage claims. The combination of extreme weather and vulnerable electrical infrastructure factors increased the relevance of Generac’s products and led to an increase in the company’s stock, while the insurance sector experienced the opposite situation, with significant declines in the value of insurance companies’ stocks.
Generac Holdings Inc., which is the largest manufacturer of standby generators in the United States, has long benefited from major storms, which typically result in a surge in demand for generators for emergency use. With the power grid vulnerable to severe weather, many consumers are looking for alternative sources of reliable electricity when natural disasters like Hurricane Milton strike. Generac’s post-hurricane stock gains are not surprising given the company’s history of benefiting from extreme weather and power outage trends.
Generator Demand Soars Due to Energy Crisis and Extreme Weather
Generac has emerged as a reliable solution to increasingly frequent power outages, whether caused by major storms or broader energy issues such as power shortages in some areas. Extreme weather like Hurricane Milton exacerbated these issues, causing households and businesses to turn to portable and standby generators to ensure continuity of power. Many areas affected by the storm experienced outages that lasted for days or even weeks, which in turn fueled demand for products like those provided by Generac.
In recent years, extreme weather events have become more frequent, and that trend is expected to continue, fueling the market for standby generators. Global warming and climate change are exacerbating the situation, creating more unpredictable weather patterns and lengthening the hurricane season in the United States. Generac, with its expertise and global reputation in emergency energy, continues to benefit from this dynamic.
In addition, uncertainty in the global energy market and increasing reliance on renewables also make energy infrastructure in many regions unstable. For example, when renewables such as solar or wind cannot provide a consistent supply, standby generators such as those manufactured by Generac are often a necessary short-term solution.
Hurricane Milton is forecast to move north of the Yucatan Peninsula on Monday and Tuesday before crossing the Gulf of Mexico to approach the west coast of Florida by Wednesday, according to the National Hurricane Center. Tampa Bay could face a storm surge of between 8 feet and 12 feet, according to forecasters.
Generac hit an intraday high of $174.08, up about 8.7% over Friday’s close. The power generation company also hit a new 52-week high.
Hurricane Milton comes on the heels of Hurricane Helene, which killed more than 220 people and wrought devastation across the Southeast, particularly in North Carolina.
Insurance stocks that have weather catastrophe exposure, meanwhile, are falling on potential insured losses tied to Hurricane Milton. Allstate, Travelers and Chubb saw their shares fall more than 3%, while Progressive and AIG all declined more than 1%.
Universal Insurance, based in Fort Lauderdale, Florida, plunged more than 15% as the catastrophe-prone carrier with Gulf Coast exposure could see heightened hurricane risks.
The shares of property and casualty insurance underwriters and reinsurers should come under pressure as Milton could result in a sharp reduction to their fourth-quarter earnings, Joshua Shanker, research analyst at Bank of America, told clients in a Monday note.
Forecasters have warned for months of an “extremely active Atlantic hurricane season” this year. This is due to warm sea surface temperatures that serve as a fuel source for hurricanes, according to Colorado State University Tropical Weather and Climate Research.
Hurricane Milton and Its Impact on Insurance Company Stocks
On the other hand, while Generac is benefiting from the energy crisis, insurance companies are facing serious challenges. Every time a major hurricane hits, insurance companies have to anticipate a huge spike in insurance claims, especially for property and vehicle damage. Hurricane Milton, which caused significant damage to coastal and inland areas of the United States, triggered massive flooding, building damage, and infrastructure destruction that ultimately increased the number of insurance claims drastically.
Insurance company stocks fell sharply due to the expectation of large payouts for hurricane-related claims. Insurance companies such as Allstate, State Farm, and Progressive saw their stock values drop after the projected losses from the hurricane were announced. Hurricane damage claims typically cost the insurance industry billions of dollars, especially if the hurricane damages a large and densely populated area. In addition to direct losses due to storms, insurance companies also face the risk of declining profitability due to the increasing frequency of natural disasters.