Hurricane Isaac Is the Least of Insurers' Worries: Street Whispers

NEW YORK (TheStreet) -- Despite the hysterical media coverage of Hurricane Isaac, share prices for major property insurers have held up quite well over the past two weeks.

Shares of The Allstate Corp.(ALL) closed at $37.33 Wednesday, down 1% from two weeks earlier, while The Travelers Companies (TRV) saw its stock rise 2% over the same period, to close at $64.80 on Wednesday.

The reason that Isaac has had no effect on the insurers' share prices is that the damage estimates so far from hurricane top out at $1.5 billion. When you compare that with a hail storm that hit Dallas in June caused just as much property damage, this hurricane will not move the insurance share needle.

In fact, the nation's largest publicly traded property and casualty insurers are still reeling from a major bet on building their businesses in the Midwest, while shying away from coastal areas, lessening the impact of hurricanes on their balace sheets and doubling down on the impact of losses from tornados, hail storms and severe thunderstorms.

As the insurers began to reduce their underwriting in coastal areas in the wake of Hurricanes Frances and Jeanne in 2004 -- and especially the catastrophic Hurricane Katrina in 2005 -- they began focusing on building their property insurance underwriting in the Midwest.

At the same time insurers faced an accelerating trend for severe storms in the region. According to a study released by the Rocky Mountain Climate Organization in May, using 50 years of data from 218 U.S. Climatology Network in Illinois, Indiana, Iowa, Michigan, Minnesota, Missouri, Ohio, and Wisconsin, the frequency of storms dropping between two to three inches of rain a day increased 30% from 2001 through 2010, with storms dropping three inches or more of rain in a day increasing 51%.

Tornadoes in the Midwest have also become more frequent. According to the National Climatic Data Center, in the spring and summer of 2011, "there were seven individual tornado and severe weather outbreaks with damages exceeding one billion U.S. dollars, and total damage from the outbreaks exceeding 28 billion U.S. dollars," and that the confirmed 1,625 tornadoes in 2011 (with 93 still pending) was "the second or third most active year on record for number of tornadoes since the modern record began in 1950."

Wild fires have also been a major concern in some parts of the country.