Hurricane Milton payouts likely to hit $36bn, according to risk modellers

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Hurricane Milton, which tore through central Florida last week causing widespread damage, will lead to about $36bn of insurance payouts for the private sector, according to risk modeller Karen Clark & Company.

The claims will come from damage caused by wind, storm surge, and inland flooding. The estimate is lower than early fears about the impact of the storm, but is well above the $6bn of claims that KCC estimates Hurricane Helene caused last month.

Moody’s on Monday said the combined insured losses from the two storms would probably amount to between $35bn and $55bn.

Milton made landfall on the west coast of Florida bringing winds of 120mph and extensive flooding, leaving millions of people without power.

However, shares in insurance and reinsurance groups potentially exposed to losses from the storm rallied after it made landfall, based on evidence that the damage was not as bad as expected.

The Karen Clark estimate does not include payments that will be made by the public sector through the US federal government’s National Flood Insurance Program, which provides flood coverage to homeowners, renters and businesses. 

A group of scientists last week concluded that Milton had been worsened by human-made climate change.

The two storms have further sharpened focus on the risks of changing weather to parts of the southern US.

“Following a surge in extreme weather events last year, we had highlighted Florida and other parts of the sunbelt as being at risk of facing a worsening of weather conditions over the next 30 years,” said Imogen Pattison, economist at consultancy Capital Economics.

She warned more insurance firms might exit the region, potentially causing a “renewed rise in insurance premiums”. 

ICEYE, a satellite operator, said that early images suggested the number of buildings affected by Milton — mostly located on Florida’s west coast around St Petersburg and Port Charlotte — could exceed the 150,000 that were hit by Helene.

The cost of Hurricane Milton is likely to be shouldered by both primary insurers and the reinsurance industry. Shares in Florida-focused primary insurers, Universal and Heritage, fell sharply as the hurricane approached, and although they have recovered some of the decline, they remain below where they were previously trading.

Shares in reinsurers such as Swiss Re and Munich Re, which also fell before the storm, have regained their pre-Milton levels.

Rating agency DBRS Morningstar on Monday said losses would probably be in the “upper half” of its estimated range of $30bn to $60bn. The agency’s Steve Liu said the twin storms could push up property catastrophe reinsurance prices at the critical January renewals.

KCC’s estimate for Milton claims is lower than Hurricane Ian, which caused $62bn of payments in 2022, adjusted for inflation, according to Swiss Re. The figure is also below that for Hurricane Katrina, which led to an inflation-adjusted $102bn of claims in 2005.