BMO Capital Markets has outlined preferred stocks within the property and casualty insurance sector as market participants head into the second quarter, pointing to continued volatility driven by artificial intelligence developments and changing investor sentiment.
The firm documents that AI-related market momentum has produced outsized moves in stock prices over the past six months, with relative performance deviating by one to three standard deviations on a weekly basis. While BMO acknowledges that AI is reshaping productivity across industries, the analysts estimate a low likelihood that insurance brokers will experience material revenue disruptions even as operational change accelerates.
BMO also says that AI productivity gains are contributing to reduced recession worries among corporate clients by enabling greater agility, yet the same AI undercurrent remains a source of significant market volatility that creates both risks and opportunities for investors in the sector.
Travelers - BMO maintains an Outperform rating on Travelers despite the insurer's stock rising about 15% year-to-date. The analysts point to persistently elevated short interest, near decade highs, as a force that could support further upside if sentiment shifts. BMO expects continued upward revisions to earnings per share to underpin the shares.
In recent broker activity, JPMorgan moved its rating on the company to Neutral while Barclays cut coverage to Underweight. Separately, the company has introduced a proprietary large language model, TravelersLLM, aimed at supporting its property and casualty business.
W.R. Berkley - BMO assigns a Market Perform rating and characterizes investor positioning as a crowded bearish trade relative to the firm’s base-case outlook. The analysts foresee an in-line result for the second quarter of 2026 and judge the probability of significant reserve deterioration to be low, suggesting the extent of short positions may be excessive.
Corporate actions add to the story: W.R. Berkley announced a 50-cent-per-share special cash dividend and an increase to its regular quarterly payout. Broker activity has been mixed, with Goldman Sachs upgrading the shares to Buy while Wolfe Research cut its rating to Underperform.
Willis Towers Watson - BMO gives Willis an Outperform rating, noting that the second quarter presents a lower bar for organic growth. The analysts expect Willis to lag rivals Aon and Marsh on organic growth - a pattern BMO says has not been observed in consecutive quarters since 2022.
First quarter margins suffered, excluding foreign exchange effects, due to the timing of the NewFront acquisition. BMO anticipates a rebound in risk and broking margins as those timing effects normalize. Recent strategic moves by Willis include the acquisition of Redefind, a crypto insurance platform, and receipt of an investment advisory license to operate within the Dubai International Financial Centre.
Taken together, BMO’s coverage underscores how macro drivers tied to AI and investor positioning are interacting with idiosyncratic company developments - from short interest and dividend actions to acquisitions and technology rollouts - to shape near-term prospects across the P&C insurance complex.