Milton likely to have exhausted much of cat budgets for Q4, earnings downgrades possible, J.P. Morgan

J.P. Morgan’s equity analyst team have stated that hurricane Milton is likely to have exhausted much of catastrophe budgets for Q4’24 in general, with the remainder of the quarter yet to come.

Ultimately, analysts noted that they see this event having the potential to lead to 2024 earnings downgrades for a number of reinsurers and Lloyd’s names.

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

However, the event was less extreme than some of the potential scenarios could have played out.

“It is early post the event but we have seen very preliminary estimates suggesting insured losses between $20-40bn
which are far less than the tail $100bn+ scenarios that could have emerged if the storm had moved closer to Tampa Bay,” analysts explained.

According to the equity analyst team at Jefferies, with Milton’s insured losses likely to be more modest than initially feared, it could wind up becoming a large earnings event

However, analysts at Moody’s recently revealed that the storm has the potential to generate significant losses for property & casualty (P&C) re/insurers, due to that fact that it moved through densely populated areas, triggering various hurricane-related perils.

On top of this, J.P. Morgan stated that they see this event having little impact on the trajectory of pricing at the upcoming January reinsurance renewals.

“We continue to see 2024/25 as a repeat of 2012/13 when prices fell 0.5% at the January 2013 renewals despite the 5th largest storm of all time (at that stage) occurring in October 2012. Therefore, with estimates potentially coming down, and little additional payback on reinsurance prices, we see the impact of Hurricane Milton as a net negative,” they added.

Focusing attention on Q3’24, J.P. Morgan revealed that it expects nat cat losses to range between $25-30 billion, which would bring the total insured losses year-to-date (YTD) to $85-90 billion, including $60 billion in H1’24 as per estimates from Aon and Gallagher Re.

The largest nat cat event of Q3’24 was hurricane Helene, which made landfall on September 26th in northern Florida as a Category 4 storm with 140 mph winds. Destructive wind gusts stemming from the storm, damaged properties from northern Florida to the Carolinas.

Recent estimates from CoreLogic have pegged total insured losses from Helene to sit around $10.5-17.5 billion, including NFIP. 

In addition, hurricanes Beryl, Debby, and Francine are also estimated to cost the insurance industry $1 billion each.

Analysts also highlighted how nat cat events in Canada are estimated to have caused insured losses of CAD$7 billion in Q3’24, which makes it one of the most destructive summers in Canadian history as per Catastrophe Indices and quantification Inc. (CatIQ).

On top of this, the severe flooding that struck Central Europe in September is also estimated to exceed $2 billion in insured losses during the quarter. 

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