Hurricane Milton's Impact on Global Insurance Industry

LONDON (Reuters) – Hurricane Milton could result in a $60 billion loss for the global insurance industry, creating a surge in 2025 reinsurance prices. This could boost some insurance companies' shares, analysts at RBC Capital said. The Category 5 hurricane is expected to make landfall on the Gulf Coast of Florida late on Wednesday or early Thursday and is potentially one of the most destructive to hit the region, which is still recovering from 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, according to RBC analysts. They added 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 noted.

Hurricane 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 have responded to rising losses from natural disasters over 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," RBC analysts mentioned in a note.

Barclays analysts estimated that insured losses from the hurricane could exceed $50 billion. Shares in global reinsurers Swiss Re and Munich Re, as well as Lloyd's of London players Beazley, Hiscox, and Lancashire, have fallen this week. However, Swiss Re, Munich Re, and Beazley have been trading at record highs due to 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 January 1.

Analysts at Peel Hunt said that a major hurricane making landfall across Tampa Bay and traveling west across the Florida Peninsula would closely resemble 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.