Live Markets: Reinsurers on watch for Hurricane Milton impact

Hannover Rueck SE

08/10/2024 11:56

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    REINSURERS ON WATCH FOR HURRICANE MILTON IMPACT
    The densely populated west coast of Florida, still reeling
from the devastating Hurricane Helene less than two weeks ago,
is bracing for landfall from the Category 4 Hurricane Milton,
with evacuations ordered for over a million people. 
    Analysts at Barclays are estimating the insured loss from
the hurricane could exceed $50 billion, with the largest
reinsurers taking a significant part of the high-severity loss. 
    "We see potential for a devastating storm that may surpass
Hurricane Ian," Barclays says, noting however that the range of
outcomes remains very wide, ranging from a $10 billion loss (for
a Category 3 hit 80 miles south of Tampa) to over $100 billion.
        The insured loss from Ian was around $60 billion.
  
    Barclays notes that an insured loss of $75 billion could
lead to changes in the capital return approach of reinsurers. 
    "A potential large loss from hurricane would serve as both
an earnings dampener, lowering capital build in 2H24 and also
potentially reducing capital buffers - both of which would
likely have implications for capital return," they write. 
    Still, the strong capital position and earnings buffers of 
Munich Re and Hannover Re mean they should be able to absorb the
impact with "relative ease", taking impacts of 27% and 14% of
pre-tax profit, respectively. 
    Britain's Beazley may benefit from lowest exposure of the
names they cover, Barclays says. On the other hand, SCOR,
Lancashire and Swiss Re may be most exposed, it adds.  
    SCOR has the lowest capital surplus, while Lancashire has
the highest exposure as a percentage of equity. 
    For Swiss Re, Barclays believes a substantial hurricane hit
may delay management efforts to increase its casualty reserves
and "remain a drag on the investment case into what may be a
harder reinsurance market for 2025". 
        
    (Samuel Indyk)
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