Hurricane Milton could cost insurers up to $100 bln, analysts say
Repeats with no change to text
Milton loss could reach $100 bln, matching Katrina
Possible loss of $60 bln would be similar to Ian
Reinsurance rates could increase and boost shares
By Carolyn Cohn and Noor Zainab Hussain
LONDON, Oct 9 (Reuters) -Hurricane Milton could result in losses of up $100 billion for the global insurance industry, creating a surge in 2025 reinsurance prices that could boost some insurance companies' shares, analysts said on Wednesday.
The Category 5 hurricane is expected to make landfall on the Gulf Coast of Florida late on Wednesday or early Thursday. It is potentially one of the most destructive yet to hit the region, which is recovering from devastation caused by Hurricane Helene less than two weeks ago.
Insured losses from Milton could be from $60-$100 billion if the hurricane makes direct landfall in the densely populated area of Tampa, analysts at Morningstar DBRS said.
A loss of $100 billion would put Milton on a par with Katrina in 2005, they added, saying that insured losses would likely be "substantial but not catastrophic".
Katrina caused the largest insured loss from a hurricane.
The second largest loss came from Ian, which hit Florida in 2022 and led to losses of around $60 billion.
RBC analysts estimated Milton would lead to similar losses to Ian that should be "very manageable" for the insurance sector.
Analysts at Jefferies estimated a mid-double-digit billion dollar insured loss would follow a major hurricane impact in one of Florida's most heavily populated regions.
"A 1-in-100 year event is estimated by some to result in $175 billion in losses for landfall in the Tampa region, and $70 billion in losses in the Ft Myers region," they wrote in a note
INDUSTRY RESPONSE
Insurers and reinsurers - who insure the insurers - have responded to rising losses from natural catastrophes, which scientists say are being exacerbated by climate change, by raising rates and excluding higher-risk business.
"Better reinsurance contract terms, broader earnings diversification and bigger reserve buffers should put the sector in better stead than before," the RBC analysts said in a note.
Shares in global reinsurers Swiss Re SRENH.S and Munich Re MUVGn.DE and in Lloyd's of London SOLYD.UL players Beazley BEZG.L, Hiscox HSX.L and Lancashire LRE.L have fallen this week. Swiss Re, Munich Re and Beazley have been trading at record highs in recent weeks following strong profits.
"It's only a matter of time before shares regain lost ground as prospects of harder pricing at the subsequent (policy) renewals set in," RBC added.
Reinsurers fix prices for many insurance contracts on Jan. 1.
Analysts at Peel Hunt said on Wednesday that a major hurricane making landfall across Tampa Bay and travelling west across the Florida Peninsula would be similar to a realistic disaster scenario set out by Lloyd's earlier this year, which projected a $134 billion loss for the insurance sector.
Lloyd’s maintains a set of mandatory Realistic Disaster Scenarios to stress test both individual syndicates and the market as a whole. The event scenarios are regularly reviewed to ensure they represent material catastrophe risks.
Reporting by Carolyn Cohn and Noor Zainab Hussain, editing by Sinead Cruise, Jane Merriman, Chizu Nomiyama and Barbara Lewis
Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
