Insurance Firms Count Cost Of Natural Disasters

by Mike Godfrey, Tax-News.com, Washington

13 April 2011

Bermuda's insurance companies have begun counting the cost of the series of natural disasters that have struck thus far in 2011, with preliminary estimates for the recent Japanese earthquake and tsnuami running into hundreds of millions for some individual firms.

XL Group, with offices in Hamilton, has posted some of the highest figures, releasing its estimates on April 4. It estimates pre-tax and net of reinsurance and reinstatement premiums losses of between USD190m and USD290m, with approximately 70% of this attributable to XL's reinsurance segment. According to the firm, this wide range of USD100m reflects the uncertainty regarding the event, including whether coverage levels will be reached under certain policies.

Montpelier Re Holdings, also based in Hamilton, puts its preliminary projections of pre-tax losses at USD126m, a figure that is based upon an assumption of an overall USD25bn industry loss.

Platinum Underwritings Holdings predicts the negative impact of Japan at USD87m on the company's Q1 2011 results, having already projected the Australasian disasters at the beginning of the year to cost in the region of USD150m in total.

Omega Insurance Holdings released on April 12 its predictions for the losses it is likely to incur for the Australian floods, the New Zealand earthquake, and the series of Japanese disasters. The floods are expected to cost the firm USD7.6m, and the earthquake's losses are estimated to come in at USD9.5m. As with the XL Group, Omega has also stressed that there remains significant uncertainty surrounding the total market loss of Japanese events, and that, as such, estimates are subject to revision. Assuming a USD25bn industry loss, Omega expects its losses at this early stage to amount to USD23.6m.

Hardy Underwriting Bermuda has also highlighted that it will take several months before true estimates of industry losses can be accurately calculated. Hardy, unlike its counterparts, estimated its individual losses based upon an industry loss of USD35bn, resulting in firm losses of GBP9-12m (USD14.5m-19.5m)

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