Hurricane Milton could cost insurers $60 bln, raise reinsurance rates, RBC says
Hurricane Milton loss could be $60 bln, similar to Hurricane Ian in 2022- RBC
Milton due to hit Florida's Gulf Coast late Wednesday/early Thursday
Rreinsurance rates could rise, boosting shares
LONDON, Oct 9 (Reuters) -Hurricane Milton could result in a $60 billion loss for the global insurance industry, creating a surge in 2025 reinsurance prices which could boost some insurance companies' shares, analysts at RBC Capital said.
The Category 5 hurricane is due to make landfall on the Gulf Coast of Florida late on Wednesday or early Thursday, and is potentially one of the most destructive ever to hit the region, which is still recovering from devastation caused by Hurricane Helene less than two weeks ago.
More than one 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, the RBC analysts said on Wednesday, adding that this estimate for Milton should be "very manageable" for the insurance sector.
"Market seems to be pricing in a similar impact from Hurricane Ian of a $60bn industry loss in 2022," RBC analysts said.
Ian was the second largest insured loss from a hurricane, following Hurricane Katrina in 2005, according to the Swiss Re Institute, which provides research on insurance.
Insurers and reinsurers - who insure the insurers - have responded to rising losses from natural catastrophes in the past few years 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.
Barclays analysts this week estimated insured losses from the hurricane could exceed $50 billion.
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 on the back of 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, editing by Sinead Cruise and Jane Merriman
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.
