Piper Sandler said Hurricane Milton could change the insurance market. Although Milton weakened slightly on Tuesday to a Category 4 storm from the maximum Category 5, Florida officials continued to warn of the serious threat the storm poses to communities. The hurricane is forecasted to reach the western part of Florida Wednesday afternoon or early Thursday, but weather conditions will likely worsen starting early Wednesday, according to officials. “The storm has the potential to be one of the largest catastrophe events,” analyst Paul Newsome wrote in a research note on Monday. “For an event as large as Milton, there will be few insurers with no losses because most have some assumed reinsurance or Lloyd’s business exposure.” Florida is more prepared for this storm than it was during Hurricane Ian — the most costly hurricane for the state — according to Newsome. However, a greater number of people have moved to the coastal regions of the state, meaning there could be higher insurance damage with Milton, Newsome said. Piper Sandler said Milton shares similarities with Ian, which resulted in $56 billion in insured losses. “Historically, insurance stocks fall as the hurricane approaches landfall and as it creates damage. The stocks then tend to rebound when the size of the insured losses become better known or are announced by the insurance companies,” said Newsome. Meanwhile, demand for insurance oftentimes rises following hurricanes and other disasters as people typically value it more following an event, the analyst added. “Typically, the stocks with the most exposure react the most. We would expect companies with market share in cat prone lines like home insurance and commercial multiple peril in Florida to fall the most,” said Newsome. Below is a table of estimated insured losses from insurance companies from Hurricane Ian. Allstate , American International Group , Chubb , Heritage Insurance , Progressive and Universal Insurance Holdings all hold large exposure to weather-related disasters, per Newsome. Allstate and Travelers also hold among the top market share levels for personal and commercial lines across hurricane-exposed states. Year to date, shares of Allstate are up 31%. The majority of analysts covering the stock are bullish, and the consensus price target indicates 10.3% more upside from Monday’s close, according to LSEG. Chubb shares are also up 23.5% in 2024, outperforming the broader market. However, the average price target implies shares will gain just 4.4% from current levels. Progressive has rallied more than 56% this year. While around half of the analysts covering shares currently hold a buy or strong buy rating on the stock, analysts are forecasting shares rising just 5.4% ahead. To be sure, the post-hurricane reaction by insurance stocks usually only lasts for a few days before returning to their typical levels, said Newsome. “The typical rebound in the insurance stocks happens when it becomes clear how large the insurance event was (or was not). This typically happens either as soon as the storm hits, if the damage is small, or when the insurance companies begin issuing loss estimates. Typically, the insurance companies have a reasonable loss estimate a week or so after the storm hits,” Newsome said. —CNBC’s Michael Bloom contributed to this report.