No matter how sophisticated technology becomes, vulnerabilities can still lead to significant damage and global outages. This was the case in recent days when a faulty CrowdStrike update caused havoc for Windows computers, laptops, and countless other devices, with significant implications for insurance stocks.
Microsoft estimates that more than 8.5 million Windows devices were struck by the update. This forced hospitals to cancel operations and airports to ground flights. With insurance broker Aon labeling the incident as the ‘most important’ cyber insurance loss event since the NotPetya malware attacks in 2017, the ramifications for the insurance industry could be seismic.
The insured loss resulting from the outage could reach $1 billion and may generate renewed relevance when it comes to accessing cover in the face of potential new technological setbacks.
Forecasts suggest that the global insurance market will grow by $1 trillion between 2023 and 2028, reaching a value of $10 trillion in the process. This growth could see significant increases among innovative insurance stocks, with the following three firms likely to rally.
Markel Group Inc (MKL)
It’s already been an impressive year for insurance stock Markel Group Inc (NYSE:MKL). The stock already recorded growth of almost 10% over the first half of 2024, and the specialty insurer appears set to rally further, according to analysts.
Markel’s emphasis on offering insurance options for more unconventional risk means that the stock can perform well in all economic climates and boasts a unique selling point (USP) that will gain extra resonance in the wake of the recent CrowdStrike outage.
In July, TD Cowen placed a buy rating on Markel stock, setting a price target of $1,986.
Because of its operational specialties, the stock is a curious proposition for investors and is backed by exceptional fundamentals.
Markel generally operates with a strong underwriting profit, but its recent Q1 earnings results, which saw operating income rally 77%, signify a company with plenty of room for further outperformance.
Progressive Corp (PGR)
Another insurance stock that’s enjoyed an impressive 2024 performance is Progressive Corp (NYSE:PGR), which closed the first half of 2024 28.51% higher.
However, Progressive Corporation is experiencing a more nuanced period for its fundamentals.
The firm’s net income fell from $420.3 million in April to $235.7 million in May and announced the sale of several office buildings in recent weeks owing to the emergence of hybrid work.
Despite these causes for uncertainty, the insurance firm remains one of the most innovative companies in the industry today. It has long been a leader in incorporating artificial intelligence into its services.
Crucially, Progressive utilizes predictive analytics to convert the data collected from clients into bespoke usage-based insurance (UBI) packages, helping to deliver motor insurance linked to their perceived road safety, for instance.
It’s this commitment to innovation that makes the stock a top draw for institutional investors. In July, CreativeOne Wealth purchase 1,063 shares in Progressive at a value of around $220,000. This underscored the perceived long-term value that the firm holds.
Berkshire Hathaway (BRK.A, BRK.B)
Although Berkshire Hathaway (NYSE:BRK.A, NYSE:BRK.B) doesn’t conjure thoughts of the insurance sector in the minds of investors, the major holding company has a keen interest in plenty of leading insurance firms.
Berkshire Hathaway holds a number of big-name insurance firms, including GEICO, GUARD Insurance, National Indemnity Company, General Re, Lubrizol, Alleghany Company, and its own Berkshire Hathaway Specialty Insurance Company.
With a market capitalization of almost $1 trillion and the guidance of Wall Street icon Warren Buffett, Berkshire Hathaway remains a leading prospect for investors. A09ny growth in the insurance sector will be felt within the firm’s stock value.
Generating an underwriting gain of $5.4 billion in 2023, Berkshire Hathaway’s re/insurance businesses have a strong record of consistent performance. The news that the firm recently bought a $6.7 billion minority stake in insurance firm Chubb shows that the holding company isn’t resting on its laurels.
For investors seeking a relatively low-risk level of exposure to insurance stocks, Berkshire Hathaway remains a strong long-term hold prospect.
On the date of publication, Dmytro Spilka did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.