Insured losses from Hurricane Milton could be $60 billion, similar to Ian 2002: RBC

Hurricane Milton could result in a $60 billion loss for the global insurance industry, creating a spike in reinsurance prices in 2025 that could lift the shares of some insurance companies, analysts at RBC Capital said. The Category 5 hurricane is expected to make landfall on Florida’s Gulf Coast late Wednesday or early Thursday and is potentially one of the most destructive to ever hit the region, which is still recovering from the devastation caused by Hurricane Helene in less than two weeks. ago.

More than a million people in coastal areas are under evacuation orders.

A $60 billion loss would be similar to losses from Hurricane Ian, which hit Florida in 2022, RBC analysts said Wednesday, adding that estimate for Milton should be “very manageable” for the insurance industry.

“The market appears to be similarly priced in the wake of Hurricane Ian for a $60 billion loss in 2022,” RBC analysts said.

Ian was the second largest insured loss from a hurricane after Hurricane Katrina in 2005, according to the Swiss Re Institute, which provides insurance research.

Insurers and reinsurers – who insure insurers – have responded to rising losses from natural catastrophes over the past few years by raising rates and shedding higher-risk business.

“Better reinsurance contract terms, wider earnings diversification and higher reserves should put the sector in a better position than before,” RBC analysts said in a note.

Barclays analysts estimated this week that insured losses from the hurricane could top $50 billion.

Shares in global reinsurers Swiss Re and Munich Re and Lloyd’s of London players Beazley, Hiscox and Lancashire fell this week. Swiss Re, Munich Re and Beazley traded at record highs amid strong profits.

“It’s only a matter of time before stocks regain lost ground as the outlook for pricing in further (policy) renewals sets in,” RBC added.

Reinsurers set prices for many insurance contracts on January 1.

Analysts at Peel Hunt said on Wednesday that a major hurricane entering Tampa Bay and traveling west across the Florida Peninsula would be similar to a realistic disaster scenario presented by Lloyd’s earlier this year, which projected a loss of $134 billion of dollars 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. Event scenarios are regularly reviewed to ensure they represent material catastrophe risks.

TOPICS
Catastrophe Natural disasters Loss of profit Hurricane