Milton loss could reach $100 bln, matching Katrina

10/10/2024 6:17

        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 and Munich Re
        and in Lloyd's of London players Beazley
        , Hiscox and Lancashire 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.