Hurricane Milton less devastating than expected, reinsurers' shares up

(Il Sole 24 Ore Radiocor) - European reinsurers are breathing a sigh of relief after news rebounded from overseas that Hurricane Milton, which struck Florida overnight, had subsided. On the Frankfurt Stock Exchange, the Munich Re stock gained almost four points, the biggest rise in the DAX 40 index and the second highest in the Stoxx Europe 600. Hannover Re also advanced (+2.1%). In Zurich, Swiss Re (+2.5%) excelled and in Paris, Scor (+2.8%) shone. The hurricane has gradually lost some of its destructive force, moving from category 5, the most devastating which had led experts to describe it as "monstrous", to the milder category 1.

One trader notes that the development of the storm, which passed through the Tampa Bay metropolitan area overnight, appears less severe than expected, although it has increased in magnitude. In addition, hurricane-related risks are relatively less important for European reinsurers, the trader notes, although the damage is still expected to be considerable and higher than the companies' budgets for the second half of 2024. There will therefore be predictable falls on the accounts, but not of such magnitude as to cause fear for their balance sheet. The analyst notes that companies such as Munich Re or Hannover Re should be able to absorb an increase in the loss ratio.

In addition, the increase in natural catastrophe losses can be expected to be factored into non-life reinsurance prices during the next round of contract renewals. Price decreases that had been thought possible in recent times are no longer on the agenda.

Milton is already the second hurricane to hit the US coast in a short period of time. In fact, it was preceded by Helene. According to Jp Morgan analysts, Milton will cause losses estimated at about $50 billion for reinsurers. The comparison is made to Hurricane Ian, which struck inland areas of Florida in 2022, causing losses of between USD 50 and 60 billion for reinsurers. According to US media reports, there are three million people without electricity in the area affected by Milton and also casualties, but the exact number is not yet known. The hurricane is now passing the Florida peninsula, moving towards Orlando and Cape Canaveral. Daytona Beach is experiencing winds of 130 km and there are reports of razed houses and flooding from the torrential rain. Meteorologists however agree that 'Milton', although destructive, was not the worst hurricane in 20 years, as feared.