The 2024 Atlantic hurricane season started with heightened forecasts predicting 23 named storms, 11 hurricanes, and five major hurricanes. Early activity was notable, with Hurricane Beryl becoming the earliest Category 5 storm to form in the Atlantic since 1920.
However, the season unfolded more moderately than expected until Hurricane Helene and Hurricane Milton marked the arrival of significant storms late in the season.
Amwins said that while the season delivered impactful events, the insurance market’s response has varied significantly compared to previous years, particularly when evaluating the outcomes of Hurricane Milton versus 2022’s Hurricane Ian.
Hurricane Milton followed a trajectory similar to Hurricane Ian, making landfall south of Tampa, Florida, and crossing the peninsula. Despite this similarity, the market impact of Milton diverged sharply from Ian.
Ian caused approximately $40 billion in insured losses, prompting sweeping changes across the property insurance sector, including increased reinsurance retentions, higher attachment points, and adjusted insurance-to-value (ITV) rates.
In contrast, Hurricane Milton’s insured losses are estimated at $36 billion. In its report, Amwins said that while this represents a significant event, it is not expected to alter the market fundamentally. Primary carriers are absorbing much of the financial impact, viewing the losses as within acceptable ranges.
Amwins highlighted that while these events will affect earnings, they are not expected to disrupt carrier balance sheets or profitability, as evidenced in recently released Q3 results.
However, homeowners and smaller total insured value (TIV) markets are experiencing intensified challenges. Carrier exits from high-hazard areas, coupled with increased use of catastrophe modeling, have left many without viable self-insurance options.
Amwins said that this has led to heightened demand for coverage in these markets, even as economic pressures persist.
Despite expectations of higher premiums following increased catastrophic (CAT) losses, the excess and surplus (E&S) market has not seen significant cost changes. Amwins attributed this to several mitigating factors: recent storm losses have only modestly affected treaties, investment income is up, capacity has increased, and demand remains stable.
However, Amwins cautioned that shifts in any of these factors could bring losses into sharper focus, potentially resulting in higher premiums if balancing mechanisms such as investment income diminish.
The evolving complexity of property risks has highlighted the limitations of traditional insurance approaches. Amwins points to parametric insurance as a complementary solution that addresses gaps in traditional risk transfer strategies.
Parametric policies provide payouts based on predefined event thresholds, such as windspeed, seismic magnitude, or rainfall intensity.
Amwins said that this approach simplifies the claims process, allowing payouts in under three weeks in most cases. Premiums for parametric policies are based on event probabilities, which tend to remain stable over time, offering consistent pricing to policyholders.
Amwins views parametric insurance as a valuable tool for managing unexpected or unmodelled risks, complementing traditional insurance coverage. As the frequency and severity of catastrophic events evolve, alternative solutions like parametric policies may play a larger role in balancing risks and addressing market needs.
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