Shares of insurance companies took a hit on Monday on concerns powerful Hurricane Isabel (search) could cause billions of dollars in damages if it meets the East Coast of the United States later this week.

Home and auto insurer Allstate Corp. (ALL) is the publicly traded insurer with the most exposure to damage caused by Isabel, based on its coverage in the areas expected to be hit, according to analysts. Its shares fell as much as 3 percent on Monday to a session low of $34.89.

Isabel, one of the Atlantic's most powerful hurricanes in recent memory, by midday had weakened only slightly to winds of 140 mph on a path that could see it hit land around Cape Hatteras, North Carolina, on Thursday.

A hurricane causing $5 billion in damage, which would be slightly worse than 1989's Hurricane Hugo, would reduce Allstate's third-quarter earnings per share by nearly two-thirds, Lehman Brothers analyst Chris Winans wrote in a Monday research note.

Among other insurers with the heaviest exposure are Progressive Corp. (PGR), Travelers Property Casualty Corp. (TAPA), SAFECO Corp. (SAFC) and Hartford Financial Services Group Inc. (HIG).

State Farm, which leads Allstate as the largest home and auto insurer, does not have a publicly traded stock.

Hurricane Andrew, the most costly hurricane ever, led to $15.5 billion in insured losses in 1992, or nearly $20 billion in 2002 dollars, according to the Insurance Information Institute.

But a massive hurricane could be good news for insurers in the long run, raising demand for insurance and letting insurers hike rates.

"The greater the industry loss, the more positive the potential effect on property insurance and property reinsurance pricing," Ronald Frank, an analyst at Smith Barney, wrote in a Monday note.

Shares of Allstate fell 59 cents, or 1.6 percent, to $35.40 in mid-afternoon trading on the New York Stock Exchange.