Hurricane Idalia insured losses manageable, but to sustain reinsurance demand: KBW

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Hurricane Idalia insured losses seem to be very manageable as they are estimated to remain in the low-single-digit billions – well below $10 billion -, according to Keefe, Bruyette & Woods (KBW) analysts.

Having made landfall on the big bend section of the Florida coast as a major Category 3 storm, Idalia has hit the region with strong winds causing flooding and leaving about 115,000 residents without power.

The National Hurricane Center expects it to move north-eastward through the Florida panhandle and into south-eastern Georgia and the Carolina shore over the next two days.

Analysts suggest that, based on its currently-projected path, Hurricane Idalia’s insured losses are likely to be well below $10 billion.

Gallagher Re had previously estimated insured losses in the low-single-digit billions, subject to Tallahassee’s experience, while reinsurance broker BMS anticipated $3-6 billion of insured losses.

This implies that primary insurers rather than reinsurers, will bear most of the losses, KBW highlighted.

“We expect Idalia’s losses – which follow 1H23’s materially elevated weather-related losses and the Maui wildfires – to sustain primary insurers’ collective reinsurance demand and the reinsurers’ underwriting resolve, (keeping us broadly positive on the Bermudian reinsurers), and to further pressure Florida’s personal property insurance marketplace, which relies disproportionately on smaller insurers,” said analysts.

KBW estimates – for the companies under its coverage – an after-tax impact of $6 billion industry loss for the publicly-traded primary insurers based on their 2022 shares of catastrophe-exposed direct written premiums in Florida and Georgia.

Adding: “We expected sustained catastrophe reinsurance underwriting discipline, since Idalia could have been much worse, but at this point, insured losses for the companies under our coverage seem very manageable.”

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