Shares in several US insurers recovered from a brutal start to the week after the impact of Hurricane Milton proved to be less severe than initially feared.

Milton made landfall around 8:30 p.m. on Oct. 9 at Siesta Key in Sarasota County, Florida, as a Category 3 storm with sustained winds of 120 mph. The storm's passage through the Sunshine State left 12 dead and 3.4 million people without power, but its landfall was well south of Tampa Bay, avoiding some forecasters' worst-case scenarios.

The dire predictions led to Florida-focused insurers losing between 15% to 23% of their value on Monday, while the S&P 500 Insurance Index fell 3.1%. However, the track away from Tampa and less-than-feared insured loss estimates of between $40 billion and $50 billion led to investors "breathing a sigh of relief" as stock prices recovered Oct. 10, said Citizens JMP analyst Matt Carletti.

"The point is you've narrowed the potential outcome significantly and importantly, taking some of those real dire scenarios [$70 billion to $100 billion] off the table," Carletti said in an interview. "I think that's exactly what you're seeing [from investors], a relief that we know a little bit more about what we're dealing with."

AccuWeather said in a press release that its preliminary estimates for total damage and economic losses will be between $160 billion and $180 billion.

Relief and recovery

Heritage Insurance Holdings Inc. was the Florida-based insurer that took the hardest hit from the gloomy early forecasts, ending the Oct. 7 trading day down 23.4%. Things turned around after Milton moved into the Atlantic Ocean as Heritage was down 13.5% for the week as of market close Oct. 10.

Universal Insurance Holdings Inc. was down 19.5% on Monday but improved to negative 9.7% by Thursday's close. American Coastal Insurance Corp. fell 15.3% at first but cut the loss to negative 9.1% by Thursday.

The S&P 500 Insurance Index also rebounded by Thursday, improving to a 1.23% decline for the week.

Universal spokesman Arash Soleimani said in an emailed statement to S&P Global Market Intelligence that the company's "hearts and thoughts" are with the residents affected by Milton and that it was "well prepared for the storm, with substantial reinsurance protection and strong reinsurance relationships that we've built over many years."

Heritage and American Coastal did not respond to a request for comment.

The improvements came on the heels of Florida Insurance Commissioner Michael Yaworsky touting in a press release the "strengthening" of the state's insurance market. Yarovsky said that United Services Automobile Association has "reaffirmed their commitment to investing in Florida's burgeoning marketplace" after both The Progressive Corp. and State Farm Mutual Automobile Insurance Co. reinforced their commitment to investing in Florida's market.

Yaworsky said the companies' moves "point to continued strengthening of Florida's property insurance market, which is contrary to the narrative that has been circulating about our industry in recent months."

While it was not the one-in-100-year event some feared, CFRA Research analyst Cathy Seifert said Milton will still "likely emerge as a very costly storm."

"Claims from Milton are likely to add significant pressure to the already strained homeowners market," Seifert said in an interview. "But the above-average level of catastrophes expected this year will likely add upward pressure on many lines of coverage, especially during the Jan. 1 renewal period."

Piper Sandler analyst Paul Newsome said in a research note that the decrease and recovery of stock prices during an event like Hurricane Milton is not unusual as prices generally fall as the hurricane reaches landfall and creates damage, then rebound when the size of the insured losses are announced.

Reinsurers rally

The early forecasts of Milton being a one-in-100-year event also influenced investors in reinsurers. RenaissanceRe Holdings Ltd. (RenRe) finished down 9.3% at the start of the week, while Everest Group Ltd. and global life and health reinsurer Reinsurance Group of America (RGA) were off 8.6% and 3.9%, respectively.

All three had made back most or all of those losses by Thursday. RenRe was down by only 0.3% for the week, RGA was down 2.6% and Everest was off 3.2%.

The three companies did not respond to requests for comment.

Global reinsurers will feel the impact of Milton, S&P Global Ratings said in an analysis but does not see Milton "overstepping the sector's annual catastrophe budgets."

"Milton, following closely on the heels of Helene, will likely significantly increase global reinsurers' claims payouts in the second half of 2024," the analysis said, noting that the same period has seen other events, including hurricanes Beryl, Debby and Francine, as well as wildfires and hailstorms in Canada and floods in Central and Eastern Europe.