Milton could bring back the fear…

It was less than two weeks ago as Hurricane Helene was making its path towards a US landfall that industry executives on a panel discussion hosted by cat MGA AmRisc were asked what kind of loss event could alter the trajectory of the E&S property market.

The consensus during the discussion at the WSIA Annual Marketplace was that softening property market conditions would only be reversed by the return of “fear in the room” from an event which has a major financial impact or changes the perception of risk.

Yet Helene looks to be the latest in a series of medium-sized cat events that will be largely retained by insurers following the upwards shift in retentions brought in by reinsurers last year.

It could be argued that the devastation wrought inland by the storm in states including North Carolina and Tennessee will serve as a reminder of the unpredictable nature of major natural catastrophe events, even if the quantum of loss is not sufficient to change sentiment around upcoming cat renewals.

But Hurricane Milton – which rapidly intensified to Category 5 on Monday with a forecast track pointing to a landfall near Tampa Bay (a peak zone within a peak zone) – could deliver a very different outcome for the market, both in terms of loss impact and its effect on renewal dynamics in property insurance and reinsurance.

Of course, writing a news piece or commentary for an overnight print deadline on a fast-moving live event is fraught with risk, and a meaningful shift of Milton’s path in the next 24 hours could alter the scenario completely.

That several Tampa Bay area-based (re)insurance executives are known to have canceled their APCIA schedules to get a handle on preparations – including potential evacuations – does indicate a level of major concern about what Milton could bring as it nears landfall in the coming days, however.

While the outcome at this stage can’t be predicted with certainty, market sentiment can quickly shift when that climate of fear returns, especially in a Florida homeowners sector still in recovery mode.

That was evidenced in the latter stages of the mid-year cat renewal, when market conditions – including in the ILS market – tightened quite suddenly after significantly elevated hurricane season forecasts were released.

The industry – and of course Floridians – will be hoping for the best and a final path that steers away from the most populous areas, especially after the devastating human tragedy brought by Helene.

At the very least, another near miss may be sufficient to inject enough caution at reinsurers to hold the line on rates as well as retentions.

If Milton is anything close to a worst-case scenario, then the discussion will be very different…