The insurance industry prepares for potential losses that could reach approximately $50 billion due to Hurricane Milton, with possible estimates suggesting that total hits could soar up to $100 billion, according to Deutsche Bank in a note sent out on Wednesday. The hurricane is anticipated to maintain its status as an "extremely dangerous major hurricane" as it approaches the west-central coast of Florida, likely making landfall on Wednesday night.
The National Hurricane Center has indicated that Milton will remain powerful while traversing the Florida peninsula into Thursday. The storm is expected to gradually weaken as it moves eastward over the western Atlantic, with a high likelihood of transforming into an extratropical storm by early Friday. Deutsche Bank has characterized this event as a "1-in-250-year occurrence" in the Gulf of Mexico, with projected loss estimates spanning from $10 billion to as much as $100 billion.
Their baseline expectation is for the insurance implications to settle around $50 billion. The looming risk of Hurricane Milton impacting the densely populated Tampa region has triggered a marked sell-off in insurance and reinsurance stocks, as outlined by analyst Cave Montazeri in the report to clients.
Major insurance companies such as Allstate ($ALL), Travelers ($TRV), Progressive ($PGR), Arch Capital Group ($ACGL), Markel Group ($MKL), W. R. Berkley ($WRB), and Everest Re Group ($EG) witnessed declines on Monday. However, these stocks staged a recovery on Tuesday and continued to rise in trading sessions on Wednesday. Flight operations across Florida have experienced ongoing disruptions, as noted by FlightAware, a flight tracking service.
Notable airports affected include Tampa International, Southwest Florida International, Orlando International, and Sarasota-Bradenton International, all of which faced closures due to the hurricane’s advance. According to Oxford Economics, around 2.8% of the United States' real gross domestic product resides directly in the path of Hurricane Milton.
If the storm hits as a Category 5 hurricane upon landfall, it could result in a 0.14-percentage point reduction in fourth-quarter GDP growth, as stated by Chief US Economist Ryan Sweet. Sweet elaborated, "Typically, hurricanes that impose significant economic impacts disrupt energy infrastructure, inclusive of offshore rigs and refineries, inherently causing a surge in national gasoline prices.".