UK insurers brace for major Hurricane Milton set to hit Florida
Shares in London-listed insurers dropped on Monday as the market braces for costs tied to Hurricane Milton, a major storm expected to hit Florida by Wednesday.
Less than two weeks after Hurricane Helene devastated nine of the US’ southeastern states, Floridians are readying for their biggest evacuation in seven years ahead of Milton making landfall.
Kevin Guthrie, director of Florida’s emergency management division, told residents to prepare for the “largest evacuation that we have seen most likely since 2017 Hurricane Irma”, which saw around seven million people flee their homes.
The weather system strengthened from a tropical storm to a hurricane on Sunday and is forecast to hit the heavily populated Tampa Bay area before travelling over Orlando.
Lloyd’s of London insurance companies were among the biggest fallers on Britain’s blue-chip FTSE 100 index on Monday.
Shares in Hiscox closed 2.6 per cent lower, while Beazley fell 2.4 per cent.
Lancashire Holdings was the biggest faller on the mid-cap FTSE 250, sliding 8.5 per cent at market close. The firm’s profits were previously hit by its exposure to natural catastrophes in the US and Europe in 2021.
“Non-life insurers could be affected by Hurricane Helene and Hurricane Milton, although this will depend upon the risk they choose to insure, or reinsure, and how much damage is done and to what,” said Russ Mould, investment director at AJ Bell.
“If the hurricane season takes a dramatic turn for the worse, that could impact near-term profits for exposed underwriters, but experienced players should have managed and calibrated risk accordingly.”
More than 200 people were killed by Helene, which made landfall on 26 September.
That hurricane’s wave of destruction is expected to cost insurers roughly $6.4bn (£4.9bn), according to an estimate by catastrophe modelling firm Karen Clark & Company last week.
Credit rating agency AM Best said insured losses from Helene would likely surpass $5bn (£3.8bn), with firms underwriting property coverage set to absorb most of the cost.
The storm brought catastrophic flooding and left millions without power. Forecasters have said some areas affected by Helene will likely be hit again.
Mould said Milton “could even be an opportunity” for some British insurers “if capital is taken out of the market as weaker players pay out or even withdraw altogether”.
“Less capital involved could mean higher rates and premiums over time,” he continued. “Lancashire was set up to take advantage of such a situation in the wake of Hurricane Katrina and the damage it did in America in 2005.”
Lancashire declined to comment on specific events. Hiscox and Beazley did not respond to requests for comment on their exposure to Milton and Helene.
Updated with closing share prices