Hurricane Milton unlikely to shift reinsurance market dynamics, says J.P. Morgan

According to J.P. Morgan analysts, hurricane Milton is unlikely to change the dynamics of the reinsurance market heading into 2025, based on current anticipated loss levels.

Hurricane Milton approached Florida and made landfall near Siesta Key on October 9, 2024, as a Category 3 storm. Loss estimates range from $20 billion to $40 billion, well below the potential $50 billion+ had the storm continued toward Tampa Bay.

Andrew Siffert, Senior Meteorologist at BMS Group, said it is safe to say that Hurricane Milton will likely be at least a $20 billion insurance market event. Gallagher Re projects Hurricane Milton-related losses to be between $30 billion and $40 billion for the private insurance market, while CoreLogic estimates industry-wide insured wind and flood losses could reach up to $28 billion, and Moody’s RMS expects insured losses of up to $36 billion.

Although the storm was less severe than expected, some have speculated that it could change the market dynamic towards flatter renewals versus previous expectation of down mid-single digits. However, J.P. Morgan analysts do not anticipate this outcome at this time.

Typically, reinsurance market shifts occur after prolonged periods of poor profitability or a sudden major event.

J.P. Morgan highlights that the return on equity (ROE) for the three largest European reinsurers—excluding SCOR due to unrelated challenges—remains strong.

“The data show us that the ROE trend for the big 3 has never been stronger than it was at 1H24. Therefore, even with our expectation that Hurricane Milton could hit FY earnings, the ROE trend is healthy and stronger than it has been at any point in the last 20 years,” analysts explained.

“Therefore, without any further major losses in H2 24, we see few catalysts for 2024 in aggregate to be a bad year for reinsurance and ROEs will reflect this, in our view,” they concluded.

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