LONDON (Reuters) – Hurricane Milton approaching the west coast of Florida could cause $60 billion (54.71 billion euros) in insured losses, triggering a rise in reinsurance rates in 2025 that could cause increase the shares of certain groups in the sector, estimates a note from RBC Capital published Wednesday.
The hurricane, which returned to Category 5 on the Saffir-Simpson scale on Tuesday, the highest, is expected to make landfall late Wednesday or early Thursday near Tampa Bay and could become one of the most destructive to ever hit the Southeastern United States, which is still recovering from the devastation caused by Hurricane Helene less than two weeks ago.
More than a million people living in coastal areas have been ordered to evacuate.
The estimated amount would be similar to the cost of Hurricane Ian, which swept through Florida at the end of September 2022, according to RBC analysts, who add that this estimate for Milton should be “very manageable”.
“The market seems to be pricing in an impact similar to that of Hurricane Ian, a loss of $60 billion for the sector in 2022,” write RBC analysts.
Ian swept through Florida in late September 2022, ranking as the second costliest hurricane in history for the sector, according to the Swiss Re Institute, which provides insurance research.
Insurers and reinsurers – who insure insurers – have responded to rising losses from natural disasters in recent years by raising rates and excluding high-risk activities.
“Better conditions for reinsurance contracts, greater diversification of income and larger reserves should put the sector in a better position than before,” say RBC analysts.
On Tuesday, Barclays estimated in a note that Hurricane Milton could weigh on the results of European reinsurers, particularly those of Scor.
Shares of reinsurers Swiss Re and Munich Re as well as Lloyd’s of London, Beazley, Hiscox and Lancashire fell this week in the run-up to Milton, while some of them had recently reached record levels on the stock market thanks to significant benefits.
“It’s only a matter of time before stocks regain lost ground as prospects of tighter pricing in upcoming (policy) renewals take hold,” RBC added.
Reinsurers set the prices of many insurance contracts on January 1st.
(Reporting Carolyn Cohn, Diana Mandiá, editing by Augustin Turpin)
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