Reinsurers ready for Milton as test of market reset

Reinsurers are better positioned ahead of Hurricane Milton than they were for Hurricane Ian and can weather the storm without the 1/1 renewal process descending into turmoil.

That is the defence of property cedants likely to be put forward by brokers at Aon as they fight to keep the waters calm at least through the 1/1 renewals, top Aon property leaders signalled to APCIA Today.  

“Reinsurers have positioned themselves for severity,” Sarah Mumm, Aon’s leader for US property, told APCIA Today. Earnings since 1/1 2023 show the pack in a “very healthy” position. “So they should be very well prepared for Hurricane Milton,” she said.

The cat losses in the first half of 2024 tell a tale. Aon counts up some $58 billion in insured damages but only a small portion of this has been covered by reinsurers. The hike in retentions built into the 2023 reset took reinsurers fully out of the frequency game. 

“Ian highlighted a number of things that needed to be addressed.”

“There are carriers that have gone from having reinsurers there in a partnership, to having them there only in an extreme event,” Dan Dick, Aon’s global head of property analytics added. He believes “a bit of rebalancing” might be needed. He can see cases in the US Midwest in which only events such as the Iowa derecho or the Tuscaloosa tornado would today break past many carriers’ retentions to a reinsurance level.

Hurricane Ian, which made landfall in October 2022, offered an entirely different context. Reinsurers were more justified in clamouring for a quick hardening to 1/1. That market move, although harsh, “was a float needed across all programmes”, Dick said. “Rates needed to come up.”  

“Ian highlighted a number of things that needed to be addressed,” Dick said of loose terms and conditions or gaps in insurance to value ratios. “I think they’ve done everything they needed to,” he said.

For more news from the American Property Casualty Insurance Association (APCIA) click here.

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