Hurricane Milton is poised to deliver a staggering $60 billion loss to the global insurance industry, according to analysts at RBC Capital. The impending Category 5 hurricane, expected to make landfall on the Gulf Coast of Florida late Wednesday or early Thursday, could be among the most devastating storms in the region's history, especially as Florida is still grappling with the aftermath of Hurricane Helene, which struck only weeks prior.

With over one million residents in coastal areas facing mandatory evacuation, the severity of Hurricane Milton’s impact cannot be underestimated. The $60 billion financial setback aligns closely with the estimated losses from Hurricane Ian, which wreaked havoc on Florida in 2022. RBC analysts commented that this potential loss for Milton should be "very manageable" for the insurance sector, as market expectations are already accounting for such catastrophic events.

Hurricane Ian holds the record as the second-largest insured loss from a hurricane, trailing only Hurricane Katrina in 2005, as reported by the Swiss Re Institute, a leading research body in the insurance industry.

In response to escalating claims from natural disasters, insurers and reinsurers have been steadily increasing their rates and excluding high-risk business. RBC analysts expressed optimism, noting that better reinsurance contracts, diversified earnings, and larger reserve buffers place the sector in a stronger position compared to previous years.

Meanwhile, Barclays analysts predict that losses from Milton may exceed $50 billion. Analysts from Jefferies highlighted that the potential impact in densely populated Florida could result in insured losses in the mid-double-digit billion range. They further elaborated on the catastrophic scenario, estimating that a 1-in-100-year event in the Tampa area could incur a jaw-dropping $175 billion loss, with $70 billion at stake in the Ft. Myers vicinity.

Despite the grim forecasts for insured losses, the stocks of prominent global reinsurers, including Swiss Re and Munich Re, and Lloyd’s of London entities like Beazley and Hiscox have seen declines this week. Notably, these companies had been trading at record highs due to robust profits prior to Milton's approach.

Market analysts, including those from RBC, remain hopeful that the shares will bounce back as the reality of stricter pricing for upcoming policy renewals becomes evident. Reinsurers typically establish pricing for many contracts at the beginning of the year.

Peel Hunt analysts caution that a significant hurricane striking Tampa Bay and continuing across Florida could mirror dire disaster scenarios outlined by Lloyd’s earlier in the year, which forecasts a staggering $134 billion loss for the insurance sector.

Lloyd's of London conducts mandatory Realistic Disaster Scenarios to assess both individual syndicates and the broader market, regularly updating these scenarios to reflect genuine catastrophe risks. With Hurricane Milton on the horizon, the insurance industry braces for potential upheaval as it navigates the financial fallout from this powerful storm.

Stay tuned as we continue to monitor the developments of Hurricane Milton and its implications for the insurance industry and Florida's residents.