Large insured losses from Milton could lead to extended hard market for property cat reinsurance, Jefferies

Large insurance industry losses from major hurricane Milton’s eventual impacts in Florida could potentially lead to an extended hard market for property cat reinsurance, according to Jefferies.

Analysts explained that should the hard market extend, it will alleviate recent concerns that the upcoming January renewals would show softening, and likely wind up supporting a further one/two more years of excess returns for Bermudians.

Hurricane Milton is currently a powerful category 4 hurricane, with maximum sustained winds near 155 mph.

Despite expected fluctuations, it is forecast to remain extremely dangerous through to landfall in Florida on Wednesday night, according to the most recent update from the National Hurricane Center.

“A direct Tampa hit would likely result in meaningful insured losses; landfall to the south (Fort Myers/Naples) could also result in sizable yet less material losses,” Jefferies commented.

Adding: “While too early to make insured loss estimates, a major hurricane impact in one of Florida’s most heavily populated regions could result in mid-double-digit billion dollar loss.”

It’s important to highlight that 2022’s Hurricane Ian, which made landfall south of Ft Myers, was estimated to be a 1-in-20 year event and resulted in $50 billion of industry losses.

However, a 1-in-100 year event is estimated by some to result in $175 billion in losses for landfall in the Tampa region, and $70 billion in losses in the Ft Myers region, analysts added.

Continuing: “While we expect primary commercial carriers to show the largest $ losses, Bermudians should see a greater hit to book value – most notably EG and RNR. Even when considering reinsurers’ move to higher attachments and >35% increases in risk-adjusted prop-CAT reinsurance rates post Hurricane Ian, a loss from a $50bn+ industry event incurred by reinsurers would be meaningful.”

If you recall, BMS Group’s Andrew Siffert recently stressed that a landfall around Tampa will be a major event for the re/insurance industry.

As well as this, KBW have also suggested that possible reinsured losses from the event could drive property catastrophe reinsurance rates up at the January 1, 2025 renewals.

Earlier today, BMO Capital Markets warned that a direct hit on Tampa at a Category 3-5 level could result in insured losses exceeding $75 billion.

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