Hurricane Milton may drive up property cat reinsurance prices: KBW

Hurricane Milton can still drive property catastrophe reinsurance prices higher at January 1 renewals, but perhaps only at a low pace, analysts at Keefe, Bruyette & Woods (KBW) suggest.

Late last night Hurricane Milton made landfall as a Category 3 hurricane in Siesta Key near Sarasota, about 70 miles south of Tampa, avoiding the worst-case scenario.

It is to move away from Florida and to the north of the Bahamas today.

The hurricane’s comparatively swift decline in intensity and its landfall location, which was not a direct strike upon Tampa, indicate that insured losses are likely to be closer to the lower end of the previously estimated $30-$40 billion range by Gallagher Re.

However, it is premature to provide a precise loss estimate at this stage, analysts warn.

Other analysts, like Icosa Investments’, estimate Milton-related insured losses to between $20 billion and $60 billion, noting the range is still subject to change due to significant uncertainty.

KBW stated: “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. Monte Carlo discussions anticipated mid-single-digit decreases ; our current expectation is low- to mid-single-digit increases.”

The three primary insurers, covered by KBW, with the most 2023 direct written premiums (DWP) for catastrophe-exposed lines in Florida include Berkshire Hathaway, The Progressive Corporation (PGR) and The Allstate Corporation.

With Berkshire Hathaway having a total of Florida cat-exposed DWP of $3,270,665. PGR has a total of $3,161,016 and The Allstate Corporation $1,871,432, according to KBW.

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