Large hurricane losses should help stabilize reinsurance pricing
Moody’s: Milton could become one of the top 10 costliest hurricanes.
Billions of dollars in losses following Hurricanes Helene and Milton will give property catastrophe reinsurance pricing a boost heading into 2025.
According to Moody’s Ratings, global insured catastrophe losses are expected to exceed $100 billion in 2024, following back-to-back hurricanes in Florida this fall. A significant portion of those losses will likely be ceded to the reinsurance sector.
While reinsurance pricing had seemed to stall earlier in the year, losses from the hurricanes and other global catastrophes should stabilize pricing going into January 2025 renewals. By contrast, at the 2024 midyear renewals in the U.S., pricing for higher limits of reinsurance declined by 5% to 10%.
Moody’s estimates that insured losses for Hurricane Milton will be around $26 billion. If the estimates are correct, Hurricane Milton will become one of the top 10 costliest U.S. hurricanes, ranking just below Hurricanes Sandy, Harvey, and Maria.
When insured losses are high after a catastrophe like Milton, a greater proportion is typically ceded to reinsurers. The impact on reinsurers will depend on how their reinsurance contracts are structured. Many could cede some of their risk to alternative capital providers in the form of collateralized reinsurance and catastrophe bonds.
According to Moody’s, the three biggest reinsurers in Florida are the Florida Hurricane Catastrophe Fund, General Reinsurance Corp., and Lloyd’s of London.
In 2024, global insured catastrophe losses topped $100 billion for the fifth consecutive year. According to Swiss Re, in just the first six months of 2024, losses were $60 billion, 62% higher than the 10-year average for first half insured losses. Catastrophes with major insurance losses this year have included five U.S. hurricanes, severe flooding in central Europe, and wildfires in Canada.
If no further large catastrophes occur in the remaining months of 2024, Moody’s analysts say losses should be within most reinsurers’ catastrophe loss budgets. However, 2024 returns will likely be lower than last year’s, and reinsurers will adjust accordingly next year.
“We expect reinsurers to maintain underwriting discipline by continuing to hold firm on terms and conditions in 2025,” Moody’s said in a report. “This includes setting attachment points high enough to avoid frequency events and limitations on providing aggregate reinsurance coverages.”
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