Reinsurers could find themselves net beneficiaries of a benign Atlantic hurricane season, with potential profits more than offsetting the effects of a softening market, analysts at J.P. Morgan noted in a recent report.
The analysts stated that while recent feedback from Monte Carlo has suggested that a light season would add pressure to pricing in US property catastrophe lines, the earnings uplift from minimal losses could be significant.
J.P. Morgan’s analysts observed, “In our view, a light season would more than outweigh the additional pricing pressure that would likely follow a benign Atlantic hurricane season.
“We examine several scenarios if the season continues to be light, and estimate that if catastrophe losses are 20% of normal Q3 budgets, this could lead to a 6-13% potential uplift to reinsurers’ earnings for 2025.”
The firm added that companies could also choose to bolster reserves if this scenario plays out, which would add a further layer of resilience against the soft market.
“If we use a 20% cat budget utilisation scenario, this is roughly equivalent to 2.5 percentage points of 2026E P&C Re revenues, which shows a light season’s potential to further smooth the impact of the reinsurance cycle. If the season is ‘normal’, which we see as being in excess of $30 billion of losses, then we would expect prices to reduce at a similar level to 2025,” J.P. Morgan added.
However, J.P. Morgan’s analysts stated that while the 2025 Atlantic hurricane season has been quiet, this can change rapidly.
The firm’s analysts continued, “The statistical peak of the Atlantic hurricane season is 10 September each year. With this date in the rear view mirror, hurricane activity has been quiet in 2025 to date in the Atlantic.
“Hurricane Erin was the only major hurricane of the year, and this did not cause any serious damage given its path. The season was forecast to be active, but this reflects a forecast of three major hurricanes (anything below this level rarely causes major damage), which is broadly in line with historical norms.
“Looking back at the last five years, only 2022 has seen lower levels of storm formation at this stage of the season.
“We would note that 2022 did end up spawning Hurricane Ian, which made landfall at the end of September 2022 and ended up being one of the costliest events of all time, driving a material hardening of the reinsurance market.”
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