New Reports Issued on Climate Change: Hurricanes Katrina and Rita have focused more attention on global warming. The debate continues to rage over whether the higher temperatures and rising sea levels are a wholly natural cycle, or are at least partially the result of humanity’s pollution of the atmosphere through the emission of greenhouse gasses, notably carbon dioxide (CO2).
The Intergovernmental Panel on Climate Change (IPCC), which conducts research under the mandate of United Nations Environment Program (UNEP), is convinced that industrial pollution is a significant factor in global warming. Its latest study concludes that “capturing and storing the carbon dioxide produced by power plants and factories before it enters the atmosphere could play a major role in minimizing climate change.”
The agency went on to propose several ways this could be accomplished.
It also continued to urge all countries to adopt measures aimed at increasing energy efficiency and at finding cleaner energy sources.
A second report from the National Snow and Ice Data Center (NSIDC) in Boulder, Colorado presented its findings that by the year 2060 the Arctic will be ice-free during the summer months. It said the accelerating decline of the Arctic ice pack is further evidence of the long-term effects of global warming. Although a good portion of the ice is below sea level, a lot of it isn’t, and it will have to go somewhere when it melts, potentially further raising sea levels.
The data shows that as of Sept. 19 the area covered by ice fell to 5.35 million sq. kms (2.01 million sq. miles), the lowest recorded since 1978, when satellite records became available. The decline in sea ice “amounts to approximately 1.3 million square kilometers (500,000 square miles),” an area roughly equivalent to twice the size of Texas. It is now 20 percent less than the 1978-2000 average. NSDIC senior scientist Mark Serreze described his concern that the rapidly melting ice indicates the presence of “a positive feedback effect, a ‘tipping-point’.” In the case of the Arctic this occurs as ice and snow melt, creating larger and larger areas of dark water that absorb more solar radiation, rather than reflecting it. As these areas increase, the warming effect increases, until the tipping point is reached and the trend becomes irreversible. The full IPCC report can be obtained at: www.ipcc.ch. The report and other information on climate change are also available on the UNEP Web site at: http://www.unep.org. The NSIDC report can be downloaded at: http://nsidc.org.
Insurers Give Hurricane Loss Estimates: Even as European and Bermudan insurers continued to post loss estimates from Katrina, they began counting the toll inflicted by Rita. The biggest announcement came from the biggest reinsurer. Munich Re said it has raised its total exposure to around 650 million euros ($782 million) after tax. Group losses from Rita could be up to 230 million euros ($276.6 million) gross and 150 million euros ($180 million) after tax. Earlier estimates had put total industry losses for Katrina alone at $15 to $20 billion and Munich Re’s losses at 400 million euros ($481 million). The company is now basing its estimates on total industry losses of around $40 billion.
Other estimates were as follows: The Bermuda-based PXRE Group Ltd. said Rita claims would be between $30 and $40 million, after tax and other recoveries. The result-when added to the $235-$350 million loss estimate from Katrina-is a projected third quarter loss of between $230 to $320 million and a full year loss of between $125 to $220 million. Standard & Poor’s reacted by lowering the reinsurer’s ratings to “A-” from “A”.
AXIS Capital Holdings Ltd. said its anticipated net losses from Katrina would be between $500 and $650 million.
IPC Holdings Ltd. said it is looking at Katrina losses in the range of $350 to $600 million, and expects a significant drop in third quarter net income.
The U.K.’s Brit Insurance Holdings PLC estimated its combined loss claims from Hurricane Katrina, the New Orleans Flood and Rita at 145 million pounds ($256 million).
Swiss-based reinsurer Converium upped its estimated losses from Katrina to between $20 and $40 million. It had previously put them at $10 to $20 million, based on lower industry estimates.
Endurance Specialty Holdings Ltd. said losses from Rita, net of reinsurance, reinstatement premiums, and tax benefits would be approximately $85 million. The company said gross losses were estimated at approximately $95 million.
QBE Buying British Marine: Australia’s QBE Insurance Group has signed an agreement to acquire the U.K.-based specialist marine insurer, British Marine Holdings Limited. The deal is expected to close before Dec. 31, 2005, subject to regulatory approvals. British Marine was founded in 1876 and provides Protection and Indemnity liability (P&I) and Hull and Machinery (H&M) insurance to ship owners. It insures over 8,000 small ships in more than 80 countries, through a network of over 250 brokers. Annualized gross written premium is about A$175 million [U.S. $132 million]. Return on equity for the 2004/2005 financial year was 31.2 percent with a combined operating ratio of 77.9 percent. Net tangible assets are in the A$160 million [U.S. $121 million] range. The purchase price is 1.7 times that figure making the deal worth around A$272 million (U.S. $205.6 million).
RenRe Receives SEC ‘Wells’ Notice: Bermuda-based RenaissanceRe Holdings Ltd. has received a “Wells Notice” from the staff of the U.S. Securities and Exchange Commission, following its investigation of the property reinsurer’s restatement of earnings due to “accounting errors” for the years 2001, 2002 and 2003.
A Wells Notice is a preliminary step, indicating that the SEC intends to recommend that a civil enforcement action be brought against the company named. It gives the company an opportunity to present a response to the allegations made against it in connection with the investigation before a formal action is commenced.
RenRe said it is in negotiations with the staff of the SEC concerning the “possible resolution of these matters,” and would continue to cooperate in the investigation. CEO James M. Stanard received a similar notice in July. As a consequence, both A.M. Best and Fitch have put RenRe’s ratings under review.
Imagine Buying Lloyd’s Abacus: Imagine Insurance Company Limited, a member of The Imagine Group, has entered into an agreement in principle to acquire all of the outstanding shares of Abacus Syndicates Limited and Abacus Underwriting Agency Limited, subject to final documentation and receipt of regulatory approvals.
Abacus Syndicates Limited is a Lloyd’s managing agency, established in 1999, specializing in professional and employers’ general liability markets. Its 2005 capacity is 75 million pounds ($133 million). No purchase price was announced. Imagine plans to further support the underwriting activities of Lloyd’s syndicates 2525 and 2526 for 2006, managed by Abacus.