Hurricane Milton has escalated to a Category 5 storm, with forecasts indicating it will make landfall in Tampa Bay on the 9th. This powerful hurricane poses a serious threat, with insured losses potentially exceeding $10 billion. The situation is further complicated as Florida and neighboring southeastern states continue to recover from Hurricane Helene’s recent devastation.
With maximum winds clocking in at 160 miles per hour, Milton may become the first hurricane in a century to directly hit the densely populated Tampa Bay area. In response, authorities have issued evacuation orders for over a million residents, and Governor DeSantis has declared a state of emergency across 51 counties, signaling that additional evacuation orders are forthcoming. State officials have described this evacuation effort as the largest since Hurricane Irma in 2017.
Fortunately, much of the Gulf of Mexico’s energy infrastructure—including oil and gas production, LNG plants, and refineries—seems to be out of the storm’s direct path. However, temporary shutdowns of platforms may disrupt energy exports.
Analyst Shiels from KBW has warned that Milton could result in “enormous insured losses,” estimating these could top $10 billion. Consequently, the stock market reacted with U.S. property and casualty insurance stocks suffering marked declines. On the 7th, the S&P Insurance Select Industry Index dropped by 2.4%. Major insurers like Chubb and Travelers saw their shares fall by approximately 4%, while Berkshire Hathaway’s stock declined by 1.8%.
Reinsurance firms also felt the pinch, with Arch Capital down 6.2%, Everest Group falling 8.5%, and RenaissanceRe plummeting by 9.3%. Shiels noted that insurers with heavy exposure in Florida have relatively low attachment points on their reinsurance policies, potentially leading to greater losses for those reinsurers.
Looking back, Hurricane Helene caused considerable flooding, with CoreLogic estimating losses from that storm between $30.5 billion and $47.5 billion. However, most of these losses stemmed from flooding—largely uninsured—thereby limiting the impact on public insurers. CoreLogic projects that private insurers could face losses ranging from $6 billion to $11 billion, with companies like Progressive and Berkshire projected to lose between $400 million and $500 million.
In stark contrast, Hurricane Milton is expected to sweep through Florida, affecting cities such as Tampa and Orlando, which may lead to significantly higher insurance claims. According to the Insurance Information Institute, forecasts indicate that windstorm losses from Milton could surpass the total losses incurred from Hurricanes Idalia, Debby, and Helene combined.
Investor sentiment is now not only focused on the immediate impact on insurance companies’ short-term profits but also considers the long-term implications of climate change and the rising frequency of seasonal disasters, as noted by Shuman, Chief Investment Officer and Partner at Running Point Capital Advisors.
