Chubb: Milton Losses Prompt $300m Insurance Sector Warning

Property and casualty insurer Chubb Limited has announced estimated losses of US$250m to US$300m pre-tax from Hurricane Milton, following forecasts that the category five storm could cost the insurance sector as much as US$60 billion.

The losses, announced by Chubb at the beginning of November 2024, include impact across its commercial and personal property insurance lines, as well as its reinsurance operations. The company, which provides insurance services across 54 countries, expects net losses after tax and reinsurance of between US$208m and US$250m.

Hurricane Milton: The insurance market impact

The storm has prompted share price declines across major reinsurance firms – companies that provide insurance for insurance companies. Swiss Re and Munich Re, alongside Lloyd's of London market participants Beazley, Hiscox and Lancashire, saw their stock valuations decrease since Milton made landfall on 9th October 2024.

RBC Capital Markets analysis indicates the sector maintains sufficient capital reserves to manage these losses, pointing to improvements in reinsurance contracts since Hurricane Ian in 2022. Reinsurance contracts allow insurers to transfer portions of their risk exposure to other firms in exchange for a premium.

Barclays analysts, meanwhile, have projected that Milton’s insured losses could exceed US$50bn as claims continue to emerge. This would position Milton's impact close to Hurricane Ian, which caused significant damage to Florida’s property market in 2022.

Storms prompting premium increases

The frequency of extreme weather events has led insurers to increase premiums and tighten contract terms, particularly in regions deemed high risk. Flood insurance, which covers water damage from storms, remains a significant protection gap – insurance industry terminology for the difference between total economic losses and insured losses.

Mark Gongloff, Bloomberg Opinion Editor, says: “An inch of water can do $25,000 damage to a house. That means you don't need a massive storm like Milton to suffer a life-changing financial problem. And yet most of us don't have insurance against flooding.”

Moody’s: Hurricane Milton wind losses could total US$34bn

Beyond flooding damage, Hurricane Milton caused widespread wind damage. Moody's RMS, which provides catastrophe risk models to insurers, recently said that it expects insured wind losses of between US$21bn to US$34bn. This total includes coverage leakage and storm surge but excludes losses to the National Flood Insurance Program (NFIP), the US government's flood insurance provider. Additional inland flooding losses, excluding NFIP losses, are estimated at US$1bn to US$2bn.

Mohsen Rahnama, Chief Risk Modeling Officer at Moody's, says: “We were fortunate to avoid the ‘grey swan’ event that many feared when Milton tracked and made landfall south of the Tampa-St. Petersburg metro area. Still, the storm's large swath of damaging winds, subsequent storm surge, and inland flood footprints affected key exposure areas throughout the state.”

The estimates include property damage and business interruption to residential, commercial, industrial, watercraft, and automobile lines of business. The figures also factor in post-event loss amplification – industry terminology for additional costs that emerge after a catastrophe.

Raj Vojjala, Managing Director of Modeling and Analytics at Moody's, says: “It's important to not just consider the overlap across areas affected by high winds and surge in Milton and Helene, but also areas that sustained damage during Hurricane Ian in 2022 that haven't fully recovered yet.”

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