A.M. Best’s London office announced that it “has begun to assess the financial impact of the Feb. 22, 2011 Christchurch earthquake on New Zealand’s non-life insurance industry, and it expects capital erosion will result in some local company ratings being affected.”
According to Best’s report, global reinsurers are likely to experience an “earnings event, but ratings should not be impacted. As more information is gathered, ratings that may be directly impacted by the event will be formally reviewed. Subsequent rating actions, if any, will be disseminated in accordance with A.M. Best’s credit rating policies and procedures.”
Best acknowledged that it “will take months to determine the precise impact of the tragedy, which has resulted in more than 150 reported fatalities. Catastrophe modeling firm AIR Worldwide has estimated insured losses for the 6.3 magnitude earthquake could be as high as USD 8 billion.”
The analysis also pointed out that “many insurers and reinsurers revised their initial estimates for the Sept. 4, 2010 quake, and some companies may take a more cautious approach before releasing estimates for the latest event.” As a result more time may be required to assess potential losses, particularly as some damage may have already occurred from last year’s earthquake.
Best indicated that larger commercial insurers and global reinsurers, with broader coverage, “are expected to bear the brunt of large losses from the February 2011 quake. Companies that were impacted by the first quake likely will sustain additional losses from the second.
“Although residential property and contents losses will partly be covered by the New Zealand Earthquake Commission (EQC), the earnings of personal lines insurers are also expected to be negatively impacted.”
Best also indicated that it “believes the cost of calamities in the Australia/New Zealand region have accumulated to impact reinsurers’ profitability, and reinsurance rates in the region are expected to increase in the forthcoming renewal season.”
Source: A.M. Best