Milton insured losses manageable for large carriers, property cat pricing unlikely to rise: Morgan Stanley

With insured losses from Hurricane Milton anticipated to be manageable for the larger carriers, analysts at Morgan Stanley have suggested that pricing is less likely to increase for property catastrophe going into 2025. However, the prior expectation for a double-digit decline is now less plausible.

For those unaware, Milton made landfall on the 9th of October in Florida’s Sarasota County as a Category 3 hurricane, bringing damaging winds, tornadoes, life-threatening storm surge, and heavy rainfall.

“Various initial estimates place the potential losses to below $50 billion. From our perspective, this is not a capital event for most of the reinsurance industry,” Morgan Stanley’s analysts said in a recent report discussing investor sentiment following the storm.

They continued, “From our perspective, given the path of the hurricane and the initial estimates thus far, we believe this will have an impact on reinsurance pricing heading into Jan-1 2025 renewal.

“We now expect property-catastrophe pricing to be flattish, although this could change as the hurricane continues to develop.”

Morgan Stanley’s analysts observed that if insured losses are more severe than estimated, this could cause much slower reinsurance capital growth, resulting in potentially higher pricing.

Meanwhile, based on Milton’s initial loss estimates and the reported damages thus far for Hurricane Helene, the firm noted that the overall capital level for reinsurance should hold up, especially assuming a conservative low double-digit ROE for 2024 excluding Helene and Milton.

“As such, while property-catastrophe pricing will not decline significantly, the overall pricing is still less likely to increase year-over-year,” Morgan Stanley concluded.

With insured losses likely to be more modest than initially feared, the equity analyst team at Jefferies has also suggested that Milton will probably be a large earnings even, though they echoed the sentiment that it is not expected to drive up property reinsurance rates in 2025.

Elsewhere, Fitch Ratings recently said that Milton is not likely to affect credit for its rated P&C insurers and global reinsurers given very strong capital levels, though Florida property insurance specialists are vulnerable to the extent the hurricane generates losses above reinsurance limits.

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