Milton may deplete P&C insurers’ cat budgets, but stay within reinsurers’: S&P

Given that many primary P&C insurers are already near their 2024 catastrophe budgets due to H1 losses, S&P believes Hurricane Milton, along with other weather-related losses, could fully exhaust these budgets. However, reinsurers may still have room in their catastrophe budgets to absorb the combined losses from Milton and other 2024 natural disasters.

For those unaware, Milton recently made landfall in Florida’s Siesta Key, Sarasota at a Category 3 level.

As Reinsurance News understands, the highest surge appears to have been in areas such as Naples, to the south of the landfall sight, but tidal gauges suggest these have not been quite as high as with hurricane Ian in 2022.

Still, with hurricane-force winds experienced right through central Florida, including Orlando, more than 2.5 million people have lost power.

There was also reportedly some tornado activity as Milton approached land, which will have caused more insured damages, alongside more than 10 inches of rainfall in some parts of Florida, which will no doubt drive severe flooding.

Following closely on the heels of Helene, Milton will “likely significantly increase” global reinsurers’ claims payouts in H2 of 2024, according to S&P’s report.

The firm continued, “Due to structural changes in reinsurance programs and fewer tail events in 2023, the top-19 rated global reinsurers held only about 10% of the market share for global insured natural catastrophe losses.

“We assume a similar market share for the first half of this year. However, given Milton’s potential scale, we expect this market share will approach the long-term average of around 20%. If Milton’s insured losses are contained to just under $50 billion, the reinsurance sector could yet remain within its annual catastrophe budget.”

S&P’s report went on, “For our rated portfolio of U.S. P&C insurers, potential losses from Hurricane Milton could fully deplete their 2024 natural catastrophe budgets, affecting underwriting margins and earnings. However, we expect capitalization will remain stable.”

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