Bermuda-based Aspen Insurance Holdings Limited announced its initial assessment of the losses sustained from Hurricane Katrina and the “Great New Orleans Flood” would be approximately $150 million.
In calculating the estimate Aspen said it had considered “recoveries from our outwards reinsurance program, the impact of outwards and inwards re-instatement premiums” on an after tax basis. “Our estimated gross losses from Hurricane Katrina fall within our outwards reinsurance program,” the bulletin added. “These estimates are consistent with our estimate of industry insured losses for Hurricane Katrina which is in the region of $40 billion. We anticipate that the majority of our losses will result from our property reinsurance lines.”
Aspen explained that its losses from Katrina “have been derived primarily on the basis of a contract by contract assessment of the loss, where we have reviewed our exposures in the loss-affected zones within our primary account and a per cedant review against policies underwritten in our reinsurance lines.” It also noted, as have many other insurers: “These estimates are necessarily preliminary and are based upon information available to date, the application of our catastrophe modeling systems, market intelligence, initial tentative loss reports and other sources.”
Concerning flood losses in New Orleans, Aspen said it believes they will exceed the economic losses from Hurricane Katrina, however, the bulletin added, “our preliminary analysis suggests that the flood losses are substantially uninsured. We expect that Aspen’s share of the industry’s insured flood losses will be modest compared to Hurricane Katrina.”
Aspen also said it intends to revise “current top line gross written premium growth guidance of 20-25 percent year-on-year following Hurricane Katrina. We believe that, after allowing for re-instatement premiums and higher rates on renewal business we expected to write in the fourth quarter and potential new business opportunities, our premium growth for the year will exceed our current guidance, although we are currently assessing the extent of the change. We will provide a further update during our third quarter earnings call scheduled for October 28.”
CEO Chris O’Kane commented: ‘”These events will have far-reaching social consequences and their impact will be felt for years to come in the insurance industry. We are currently evaluating the likely impact on market conditions and on prices on loss impacted and other lines across our business, in particular on-shore and off-shore energy physical damage, major account property insurance and catastrophe exposed property reinsurance. We anticipate that we will see significant price increases in these lines. As a result of North Atlantic Hurricane activity this year and last, our underwriters, actuaries and catastrophe modelers are re-examining the foundations of catastrophe property pricing. Current atmospheric and sea surface temperature cyclical fluctuations lead us to believe that we may be in a period of exceptional turbulence for some years.
“Hurricane Katrina and the Great New Orleans Flood are first and foremost humanitarian tragedies. Aspen has made charitable donations to relief agencies when disasters of similar magnitude have occurred in the past and we will do so on this occasion. Our thoughts and sympathies are with those affected by the disaster and their families at this time.”
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