It is as predictable as the day is long. A natural disaster strikers and traders look to profit by going long stocks with ties to the recovery effort, such as Home Depot (HD). Often times, the other side of the trade is shorting property and casualty insurance providers on the expectation that losses could mount for these companies following an earthquake, hurricane, tornado, etc.

That could easily be the case following Hurricane Sandy with some analysts pegging insured losses anywhere from $7 billion to $20 billion. The high end of that range could prove disastrous for insurance providers and the corresponding ETFs. For example, $20 billion is more than double the average market value of the PowerShares KBW Property & Casualty Insurance Portfolio's (KBWP) 24 holdings.

The PowerShares KBW Property & Casualty Insurance Portfolio is the one ETF that comes right and says it is heavily allocated to property and casualty providers. Dow component Travelers (TRV) is the fund's largest holding with a weight of 10 percent. Other top holdings include Allstate (ALL) and Chubb (CB). KBWP is not heavily traded. In fact, the ETF has not traded yet on Monday November 5, but the fund is off 4.3 percent in the previous five trading days. That performance could be an indication traders were pricing in tough times for the ETF's holdings even before Sandy made landfall.

KBWP is far from the only vulnerable insurance ETF in the wake of Sandy. The $114.5 million SPDR S&P Insurance ETF (KIE) allocates nearly 39 percent of its weight to property and casualty providers and another 16.3 percent to multi-line insurance providers. Translation: KIE is far from insulated from any post-Sandy negativity that could hamper insurance providers. The ETF has tumbled 2.1 percent in the past five days.

Another ETF that traders have been sinking their teeth into is the iShares Dow Jones U.S. Insurance Index Fund (IAK). The $71.7 million fund allocates more than 54 percent of its weight to P&C firms. Travelers, Prudential (PRU), Ace (ACE), Chubb and Allstate combine for over 28 percent of the ETF's weight. Not surprisingly, the fund has slid 2.4 percent in the past five trading sessions.

As a result of the Sandy-induced fundamental problems these ETFs now face, the funds have become technically vulnerable. Both IAK and KIE are within pennies of falling below their 50-day moving averages.

Those looking to buy one of these ETFs on the dips should tread carefully and check on the funds' holdings prior to buying. It is often forgotten with equity-based ETFs that it is the underlying holdings that determines the fund's price action. To that end, investors should note that in the past five trading days shares of Travelers have tumbled 4.1 percent. Allstate has dipped 5.1 percent while Chubb has plunged 6.3 percent.

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