Swiss Re has issued a major revision of its expected claims from Hurricane Katrina, increasing its loss estimates by $700 million from $500 million to $1.2 billion. The reinsurer is the first, but undoubtedly not the last, to make such an adjustment. Standard & Poor’s has placed the Group on its “Katrina” CreditWatch (see related article).
Swiss Re explained that its previous estimate had been based on an overall insured loss figure for the industry of $20 billion. “As Swiss Re now estimates an insurance market loss in the range of $40 billion, the company expects its own claims to be in the range of $1.2 billion before tax,” said the bulletin. It also warned that, “due to the unique nature of the event, the complexity and the magnitude of destruction caused, accurate claims estimates remain difficult.”
CEO John Coomber commented: “We are witnessing increasing natural catastrophe events across the globe, effecting economies and societies with a higher frequency and severity. Price levels in the upcoming renewals must be adjusted to reflect these developments.”
Swiss Re indicated that, while it is “over the cycle target of 10 percent earnings per share growth will likely not be met for 2005.” It also said that it does “expect to use part of its equalisation reserves, built to help mitigate large claim events such as Katrina.” The bulletin added that “Swiss Re’s financial strength remains very strong and is expected to grow further in the second half of the year.”
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