Milton could drive property catastrophe reinsurance rates up at 1/1 2025: KBW

While industry losses from hurricane Milton may not be as high as had initially been feared, the storm’s impacts in Florida are still expected to be a loss in the tens of billions of dollars, and alongside loss experience in the sector to-date this can still drive property catastrophe reinsurance rates higher at the January renewals, KBW has said.

Citing Gallagher Re’s pre-landfall estimate for between $30 billion and $40 billion of industry losses from hurricane Milton, KBW’s analyst team note that, “The hurricane’s relatively rapid weakening and its landfall location (not a direct hit to Tampa) suggest insured losses closer to the lower than the higher end,” of that range.

They further explain that it’s “too early to pinpoint a loss estimate.”

Adding, “We expect Milton’s losses to drive property catastrophe reinsurance rates up y/y during the January 1, 2025 renewals, but lowered reinsured losses imply lower pricing increases.”

So the analysts are suggesting Milton may be a sufficiently large industry loss to halt any softening of property catastrophe reinsurance, perhaps resulting in some increases at January 1 2025 renewal contract signings.

First-half 2024 global insurance industry catastrophe losses were estimated at between $60 billion and $66 billion by most of the firm’s we track.

The third-quarter is likely to see around $30 billion added to that total, with the possible double-digit hurricane Helene likely to be the largest single event of that quarter.

Now, hurricane Milton in early Q4, could add a further $30 billion plus in losses to the total, which would take industry catastrophe losses for the year to somewhere around the $120 billion or higher level, it now seems.

That is another expensive year of weather and natural catastrophe losses for the industry and the fact two relatively meaningful loss events have occurred in Florida, while five land-falling US hurricanes have been seen, this could all be sufficient to increase reinsurance capital providers desire to ensure they are adequately compensated for the risk they assume.

After the recent Monte Carlo Rendez-Vous industry event, which was before hurricane’s Helene and Milton, the expectation was set that property catatsrophe reinsurance rates would likely decline in the mid-single digits.

Now that seems less likely, analysts suggest. Remember Goldman Sachs analysts had also said a hurricane Milton insurance industry loss of above $25 billion would be sufficient to change the pricing narrative for property catastrophe risks at the end of year reinsurance renewals.

Also read:

– Most mutual cat bond & ILS funds slid a little further on Milton’s final approach.

– Cat bond funds can still finish the year positively: Twelve Capital’s Wrosch.

– Hurricane Milton losses likely below a 5% cat bond market impact: Icosa Investments.

– Hurricane Milton: Pre-landfall broker loss estimates ranged $15bn to $40bn.

– Hurricane Milton Cat 3 landfall in Sarasota. Worst case Tampa loss scenarios avoided.

– Hurricane Milton: Insurance, reinsurance, cat bonds, ILS ready to respond.

– Some mutual cat bond and ILS fund NAVs fall further on hurricane Milton threat.

– Hurricane Milton industry loss at $25bn+ changes pricing narrative: Goldman Sachs.

– Hurricane Milton cat bond loss potential still in wide range: Icosa Investments.

– Hurricane Milton seen denting cat bond market -1.4% (excl. surge): Plenum.

– 33% chance hurricane Milton loss above $50bn. Would drive hard market: Euler ILS Partners.

– Hurricane Milton Cat 5 again. Tracks slightly south. Uncertainty still high, loss range wide.

– Safe to say hurricane Milton likely a $20bn+ insurance market event: Siffert, BMS.

– Hurricane wind speeds forecast across entire Florida Peninsula as Milton approaches.

– Mexico’s catastrophe bond presumed safe from hurricane Milton.

– Stone Ridge leads managers cutting mutual cat bond or ILS fund NAVs on hurricane Milton.

– Hurricane Milton could be a huge test for the entire (re)insurance market: Evercore ISI.

– Hurricane Milton losses could amount to tens of billions, but uncertainty high: BMS’ Siffert.

– As hurricane Milton intensifies, Mexico’s catastrophe bond comes into focus.

– Material hurricane Milton losses could change 2025 property reinsurance price trajectory: KBW.

– Cat bond & ILS managers explore options to free cash, as hurricane Milton approaches.

– Hurricane Milton: First Tampa Bay storm surge indications 8 to 12 feet.

– Hurricane Milton is biggest potential ILS market threat since Ian in 2022: Steiger, Icosa.

– Hurricane Milton forecast for costly Florida landfall. Cat bond & ILS market on watch.