Why Chubb Limited Fell Today

Shares of insurance leader Chubb Limited (NYSE: CB) fell fairly hard on Wednesday, down 3.9% as of 12:36 p.m. ET, even though the broader indexes were up on the day.

But while indexes were largely positive, it seems the entire insurance sector was down on the day. While it doesn't appear there is a single reason for the move, a confluence of negative insurance-related stories may be causing investors to sell this "defensive" sector and buy other more economically sensitive sectors.

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A "hard" market is beginning to soften

It should be noted the insurance industry has generally seen a very positive three years or so, ever since inflation and higher interest rates emerged in 2022. While climate-change-related storms are causing more damage and the legal system is putting higher judgments on the backs of insurance carriers, that also spurred many insurers to leave the business, leaving the remaining companies to raise rates fairly significantly over multiple years.

Today, Newsweek published an article on a recent survey by research firm Guardian Services, which concluded a significant portion of U.S. homeowners haven't taken proper steps to reinforce their homes from storms and earthquakes. While one would think underwriters would take this into account when pricing policies, it's also possible damage could be greater than expected if and when a catastrophe hits these homes.

Another story today highlighted that after many property and casualty insurance companies fled the large and important state of Florida, two insurers, Incline National and Florida Insurance & Reinsurance, are now entering the state again.

While it's a good sign for customers in Florida, it also means more competition. This appears to be an ongoing trend in recent months. Earlier this month, it was noted that insurance pricing is beginning to roll over, with property rates projected to fall by high single digits to low double digits in 2025, albeit off of very high rates reached after the past few years.

Image source: Getty Images.

A related story may also be hurting

While Chubb doesn't write health insurance, there was also a negative story on health insurers today. Health insurer Centene pulled its full-year guidance due to higher-than-expected medical costs related to customers buying its plans on the Affordable Care Act (ACA) state-run marketplaces.

While that's not really related to Chubb, it might be casting a pall over the larger insurance sector, with many leading insurers across all types of segments largely in the red today.

Finally, there may also be some sector-related rotation today, as there was yesterday to start off the new quarter. As larger funds may be "rebalancing" portfolios to start the second half, investors may be betting on lower interest rates and inflation going forward, which would help more economically sensitive stocks relative to insurers.

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Billy Duberstein and/or his clients have no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.