Light hurricane season offers profit boost for reinsurers: J.P. Morgan

There could be a material upside for reinsurers’ profits if the remainder of the 2025 Atlantic hurricane season remains light, according to a recent report by J.P. Morgan.

With Q3 now complete, the period is expected to have been very good from a catastrophe loss experience perspective.

However, analysts are cautious about declaring a completely benign season, as the Atlantic Hurricane season officially continues beyond 30th September.

In its report, J.P. Morgan examined several scenarios based on the use of catastrophe budgets. Reinsurers allocate specific budgets for potential catastrophe losses, and a quiet hurricane season could allow them to recognise unutilised funds as additional profits.

In a scenario in which catastrophe losses utilise 20% of loss budgets, the reinsurers could potentially increase pre-tax earnings between 6% and 13%, with the highest theoretical sensitivity at Hannover Re.

At 50% of budget usage, analysts estimate that this could lead to an uplift of between 4% and 8% of profit before tax (PBT).

The report also noted that a 20% utilisation of the Q2 2025 catastrophe loss budget, when compared to the 2026 estimated P&C Re net revenue, could translate to a boost of 1.8% at the low end at SCOR and 3.1% at Swiss Re.

J.P. Morgan stated: “We believe that this shows that if there is a light Q3, this would give the reinsurers meaningful flexibility to absorb further price decreases.”

Despite the positives, analysts remain cautious, as it is still premature to confirm the hurricane season is fully over.

At the same time, given the current profitability levels within the industry, J.P. Morgan anticipated that pricing will trend downwards into 2026, regardless of whether the 2025 season is benign or normal.

A light Q3, however, could allow reinsurers to not only meet their 2025 earnings targets but also strengthen their balance sheets.

This, in turn, should help the industry maintain high levels of profitability as the current market cycle softens.