A benign hurricane season is good news for reinsurers, but only in the short term

Jefferies explains, and this is one of those sentences you need to read a few times to process: "One of the key principles underpinning the global reinsurance industry is that the pricing reaction prompted by a material loss should at least offset that cost over time, preferably also compensating for the time value and cost of capital in the interim."

In short, as they say, greater risk ought to drive a greater reward.

"Crucially, this can create some seemingly unusual outcomes, where the value of reinsurers can be higher after a major loss than they were before."

"Unfortunately, this dynamic also works in reverse, and, as such, it would not be contradictory for an earnings surprise with 3Q 2026 results to be met with consensus earnings cuts for FY 2027 and beyond, with the net impact being negative for valuation."

(Alun John)

El Niño weather conditions have been affecting the world throughout this year and one less discussed consequence is how benign the Atlantic hurricane season has been.

That means, Jefferies analysts say, third-quarter earnings for reinsurers should be "remarkably profitable", though the longer-term impact might not be as bullish.

We are about halfway through the Atlantic windstorm season yet so far there have been five named tropical storms and no hurricanes, Jefferies says. The long-term seasonal average is 14.4 named storms, 7.2 hurricanes, and 3.2 major hurricanes.

Fewer and less violent storms mean fewer losses, and so good news for insurers and reinsurers.

Though in the longer term, fewer storms are not necessarily good for insurers.