Swiss Reinsurance Co., the world's second-largest reinsurance company, on Monday doubled to $40 billion its estimate of claims the global insurance industry will face from Hurricane Katrina -- a figure that would make it the world's costliest hurricane ever.
GENEVA — Swiss Reinsurance Co., the world's second-largest reinsurance company, on Monday doubled to $40 billion its estimate of claims the global insurance industry will face from Hurricane Katrina -- a figure that would make it the world's costliest hurricane ever.
Swiss Re, which previously agreed with the world's largest reinsurer Munich Re that the total losses would be $20 billion, said it increased loss estimates because the damage caused by the hurricane was greater than thought.
"Due to the unique nature of the event, the complexity and the magnitude of destruction caused, accurate claims estimates remain difficult," the Zurich-based company said.
Swiss Re also more than doubled to $1.2 billion the estimate of the claims the company itself may face, which means it will fail to meet its earnings-per-share growth target of 10 percent this year. It previously had estimated its claims would be about $500 million.
Hannover Re AG, the world's third-largest reinsurer by gross premiums, noted that some estimates for Katrina's insurance losses go as high as $60 billion. It said that could mean it also might have to revise its net profit forecast below a previous estimate of at least $384 million.
"If the total insured loss is in the area of $40 billion to $60 billion, our exposure will be above the previous estimate of 250 million euros pretax, and this could lower our group net income," Chief Executive Wilhelm Zeller said during an insurance industry meeting in Monaco.
Munich Re said it also will raise its estimates after it evaluates its exposure to the hurricane.
Risk Management Solutions Inc. of Newark, Calif., last week raised its forecast for the total insured loss caused by Katrina to $40 billion to $60 billion, up from its previous estimate of $20 billion to $35 billion. It now sees the total economic damage caused by the hurricane above $125 billion, up from its previous estimate of above $100 billion.
The revised estimates would make Katrina the most costly hurricane ever, ahead of Andrew in 1992, when claims reached $22 billion with figures adjusted to current dollar values, according to Swiss Re figures.
Swiss Re said it will use its reserves to cushion the impact of the hurricane.
Swiss Re shares fell in early trading, but recovered and by late morning were up 0.6 percent at 82.90 Swiss francs ($66.70) on the Zurich exchange.
"Swiss Re's financial strength remains very strong and is expected to grow further in the second half of the year," the company said. It confirmed it plans to pay a dividend of 2.50 francs ($2.01) per share for 2005.
Chief Executive John Coomber said the higher frequency of natural disasters would force up prices in upcoming renewals.
French reinsurer Scor SA, which has drastically cut back its U.S. business during restructuring over the past three years, said it is sticking to its original estimate that its exposure to losses from Katrina will be in a range between 25 million euros and 35 million euros ($31 million to $43.45 million).
The company said it was not liable for damages deemed to be caused by the hurricane but did cover businesses and infrastructure that may have been damaged by flooding. Scor said in recent years it has focused more on areas away from the coasts where weather risk is lower.
Converium Holding AG, another reinsurer based in Zurich which has limited exposure in the United States, said its estimates for its own insured losses from Katrina remain unchanged at between $10 million and $20 million.
Source: Associated Press
