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Insurance stocks are racing ahead of the market in the third quarter — What to know

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Markets,Ishares U.S. Insurance ETF,Travelers Companies Inc

Shares of insurers are outperforming as companies get a better handle on the auto market and push premiums higher.

Financial markets have given investors several scares and head fakes this summer, but one group is emerging as a winner with a balance of fundamental improvement in its business, and defensive qualities — insurance stocks. The iShares U.S. Insurance ETF has gained 8.2% in the third quarter, compared to 2.4% for the S & P 500. The sector is beating the broader market on a year-to-date basis, as well. IAK 3M mountain Insurance stocks are outperforming in the third quarter.

The period of rising costs put an emphasis on efficiency, which helped the larger insurance companies because they have more money to invest in technology, such as drones, Heal said. "The technology's made it much easier for them to detect fraud," Heal said. Because of the size benefit, Argus likes multi-line insurers including Travelers and Chubb , which recently saw an investment from Warren Buffett 's Berkshire Hathaway .

 

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