Hurricane Milton Could Use Up P/C Insurers’ 2024 Catastrophe Budgets

S&P Global Ratings said potential losses from Hurricane Milton could fully deplete the 2024 natural catastrophe budgets for rated U.S. property/casualty insurers, affecting underwriting margins and earnings.

In a report titled “Hurricane Milton: The Implications For Rated U.S. Insurers And Global Reinsurers,” issued hours before the hurricane made landfall, the rating agency estimated the catastrophe budgets of 16 rated property/casualty insurers aggregates at about $40 billion, while year-to-date catastrophe losses have already reached $26 billion.

“Given that many primary insurers are already close to 2024 catastrophe budgets based on first-half catastrophe losses, we believe the potential losses from Hurricane Milton, combined with other weather-related losses so far, could fully exhaust their 2024 catastrophe budgets. This will affect underwriting margins and earnings but not capitalization,” the report said, putting year-to-date pre-tax profits at around $69 billion.

“While the magnitude of insured losses remains unknown, most rated U.S. primary P/C insurers entered 2024 with substantial capital buffers at the 99.99% confidence level under our risk-based capital adequacy model,” S&P said, indicating that capitalization is expected to remain stable.

In contrast to the earnings pressures of primary insurers, S&P said there is ample room in reinsurers’ catastrophe budgets to keep earnings intact.

“The reinsurance sector’s expected 2024 combined earnings of $44.8 billion, and its catastrophe budget of $19.2 billion, provide a substantial buffer of about $64 billion before any catastrophe losses affect its capital,” S&P said, reporting on the results of 19 rated reinsurers. “While capital levels and risk appetites can vary among individual reinsurers, the sector’s overall resiliency has notably increased in recent years,” S&P’s report said.

Topics Trends Catastrophe Natural Disasters Carriers Hurricane Property Casualty