New Zealand Quake Shaping up as First-Quarter Earnings Event (update)
By CYRIL TUOHY, managing editor of Risk & Insurance®
Insurers and reinsurers are going to take a hit in the first quarter in the wake of flooding in Australia in January and the 6.3-magnitude earthquake that struck Christchurch, New Zealand, on Feb. 22.
XL Group Plc. in Bermuda on March 9 announced pretax losses of between $70 million and $85 million net of reinsurance recoverables, and PartnerRe in Bermuda announced on March 8 projected losses of between $180 million and $240 million pretax and net of reinsurance on projected industry losses of $10 billion.
Swiss-based Allied World Assurance Co. announced the temblor will cost it between $30 million and $40 million pre-tax and net of recoverables. Validus Holdings said the earthquake could cost between $25 million and $50 million.
Swiss Re announced provisional estimates of losses due to the earthquake, which leveled buildings and killed more than 160 people, as high as $800 million pre-tax and net of recoverables.
The New Zealand earthquake, said Stefan Lippe, CEO of Swiss Re, "took a heavy toll" in terms of lives lost. The total insured losses could also heavy, to the tune of between $8 billion to $12 billion, Swiss Re said.
"The New Zealand earthquake is a big event, and Swiss Re's share (is) higher than expected," said Vontobel analyst Stefan Schuermann, quoted in a Reuters news report published earlier this month. Schuermann said he was cutting his 2011 earnings estimate for the company.
Munich Re, the world's No. 1 reinsurer, has not said how much this latest quake would cost it.
Based on expected loss claims from an earlier 7.1-magnitude earthquake that hit New Zealand in September, Munich Re's share of damage would be higher than Swiss Re's, according to the Reuters dispatch, citing an analyst report issued by Credit Suisse.
Hannover Re, the world's No. 3 reinsurer, said on March 6 that its "net loss burden" due to the New Zealand February quake is around $209 million.
The February quake, which struck Lyttelton, New Zealand, about 3 miles from Christchurch, the nation's second-largest city, is one of six aftershocks measuring more than 5.0 magnitude that were felt in the wake of the 7.1-magnitude Darfield quake.
This lastest 6.3-magnitude February aftershock struck at a shallower depth and was much closer to Christchurch than the 7.1 temblor on Sept. 3 and was thus more destructive, according to a report issued by Guy Carpenter & Co.
In downtown Christchurch an estimated 6,000 businesses were either destroyed or prevented from doing business because of police cordons, the Guy Carpenter report said.
New Zealand authorities expect a total of more than 31,500 claims to be filed in connection with the quake, according to Aon Benfield, in a catastrophe recap report.
The good news--if you can call it that--for the global commercial insurers and reinsurers, is that the losses are not enough to be considered a capital event, at least not yet. Capital events typically result in a ratings downgrade from ratings agencies.
For new Zealand Local Government Insurance Corp., it's a different story as A.M. Best & Co., announced on March 3 that it would place under review "with negative implications" the financial strength of the local insurer.
Floods that hit Australia earlier this year will cost Australian insurers an estimated $2 billion, and Cyclone Yasi another $500 million, according to the Insurance Council of Australia.
March 8, 2011
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