Milton’s effect on global re/insurance ratings expected to be limited: Fitch

According to Fitch Ratings, Hurricane 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.

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.

As per the rating agency, Milton’s insured losses will range from $30 billion-$50 billion and will be a 4Q and 2024 earnings event for large-rated insurers with Florida exposure.

“The insurance losses will hit reinsurance attachment points, shifting a meaningful amount of losses to the reinsurance market, particularly from the Florida specialist companies with lower retentions,” Fitch added.

The firm continued, “Ultimate losses will also depend on demand surge, as Milton follows closely on the heels of Hurricane Helene, a Category 4 that devastated the southeast U.S. two weeks earlier.

“Higher demand and limited supply of labour and materials needed to adjust claims and repair/rebuild following multiple large-scale disasters can increase insured losses by 20% or more.”

At the same time, Milton is anticipated to push global industry-insured losses thus far in 2024 to over $100 billion, which is reportedly the fifth consecutive year losses have crossed this threshold.

“This heightened level of catastrophe losses will likely limit any potential for rate declines in property catastrophe business in 2025 as re/insurers maintain underwriting discipline. Florida property experienced flat to 10% rate declines at June/July 2024 reinsurance renewals, reflecting the limited impact of the 2023 hurricane season,” Fitch observed.

The rating agency concluded, “The property market could see a hardening of premium rates, depending on the ultimate Milton losses and the amount of additional catastrophe losses for the remainder of 2024. However, the sizable property reinsurance price increases experienced in 2023 are unlikely given the more adequate current pricing environment.”

In related news, Moody’s recently suggested that insured losses from Hurricane Milton will affect both primary insurers and the reinsurance sector, with the proportion of losses ceded to reinsurers increasing as losses increase.

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